Fibonacci Cluster Technical Indicator

Fibonacci cluster is an advanced Fibonacci technical indicator used extensively by traders of all kinds to find support and resistance levels and to predict trend reversals. Fibonacci clusters are easy to interpret and are easy to use in conjunction with other technical analysis tools.

Fibonacci cluster is a collection of a number of Fibonacci retracement lines represented in different shades. Different trading systems use different methods of representing them; the most popular method of representing Fibonacci cluster is in a side bar of a price chart. The more the number of retracement lines meets in a price level, the darker will be the shade of Fibonacci cluster corresponding to the price, and the strong the support/resistance level is.

Traders can also create Fibonacci clusters manually by drawing new Fibonacci retracement lines over and over a volume/price graph (better if you use different colors each time). The more the numbers of lines at a price level the more the chance of being it a support/resistance level. It is advised to always use Fibonacci clusters in conjunction with other technical indicators and Fibonacci techniques, where clusters can be used to identify a support or resistance level and some other indicator to confirm it.

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