Fibonacci Circles

Fibonacci circles apply the same ratios as Fibonacci arcs but draw full circles rather than semicircles. The theory — rooted in the work of W.D. Gann on time-price equivalence — suggests that markets move in circular patterns where time and price are interchangeable dimensions. Each circle has a radius equal to a Fibonacci ratio of the vertical distance of a price swing.

Where a circle intersects price — at any point along its circumference — represents a potential equilibrium zone where time and price are balanced. These intersections are watched for reversals, acceleration, or significant volatility expansions. The concept draws on the mathematical property that a circle is the set of all points equidistant from a center — in this context, equidistant in time-price space from the midpoint of a defined swing.

Circles are distinct from arcs in that they provide 360° of coverage. While arcs only project in the direction of the trend, circles surround the center point in all directions. This means a circle can intersect price multiple times as price oscillates around the center, with each intersection being a potential reaction point. Circles are particularly valuable in mean-reversion and range-bound strategies where price cycles around a central value. They can also be used in trending markets to identify when a pullback has reached a harmonic balance point.

The Fibonacci Circle is a two-anchor drawing tool. The two anchors define a vertical range (swing low and swing high). The tool computes the midpoint of this range as the center of all circles and draws concentric full circles around this center, with radii equal to Fibonacci ratios of the vertical range.

Unlike arcs which radiate from an endpoint, circles radiate from the center point of the range. Each circle extends fully in all directions — up, down, left, and right — providing a complete geometric envelope around the swing. The circles are static once drawn (the center and radii are fixed at placement time), but price continues to move through them as time passes, creating future intersection points. The center point itself is often a significant price level (the midpoint of the swing).

1. 1
   Click the first point

   The swing low of the reference price move. Choose a clear structural low that represents a significant turning point.
2. 2
   Click the second point

   The swing high of the reference move. This anchor becomes the centre of the rings, and concentric circles are drawn outward at Fibonacci ratios of the move — the 100% ring passes through the first anchor. The rings take their aspect from the anchor box, so they are perfectly round only when the trend line sits at 45°; the Centre option in the style toolbar can move them onto the first anchor instead.

The vertical range is R = |Price₂ − Price₁|. The center is at Price_center = (Price₁ + Price₂) / 2. Each circle has radius rᵢ = (R / 2) × ratioᵢ (when ratio is applied to the half-range) orrᵢ = R × ratioᵢ (when ratio is applied to the full range). The equation of each circle is:(x − Bar_center)² + (Price(x) − Price_center)² = rᵢ². The price at which the circle intersects a given bar can be solved as:Price(x) = Price_center ± √(rᵢ² − (x − Bar_center)²).

• Circle boundaries act as curved support and resistance. Price approaching a circle from the inside may bounce off it; price approaching from outside may accelerate through it.
• A touch of the 0.618 circle coinciding with a horizontal support or resistance level creates a strong confluence zone. This is the circle-equivalent of the golden pocket and is highly reliable.
• Price may accelerate through a circle boundary on high volume, continuing to the next circle. Such breakouts suggest the market is operating at a new volatility regime and the previous range has been broken.
• When price circles multiple times around the center, each pass at a different radius increases the significance of that radius level. The 0.618 circle touched three times is more significant than the same circle touched once.
• If price consolidates within a narrow range between two circles, the eventual breakout from that band is often explosive. The width between the circles acts as a natural volatility measure.

1. 1
   Draw circles from a significant swing

   Anchor on a major price move visible on the daily or weekly chart. The swing should be clearly identifiable with a sharp low and high. A 2:1 ratio of range width to height is ideal.
2. 2
   Identify the nearest circle boundary

   Determine which Fibonacci circle is nearest to the current price. The distance from current price to the circle gives a sense of how much room the move has left before reaching a harmonic zone.
3. 3
   Look for confluence at the circle

   Does a horizontal S/R level, trendline, or moving average also coincide with the circle intersection point? The more confluence factors, the stronger the signal.
4. 4
   Trade the reaction at the circle

   Enter on the reversal pattern (pin bar, engulfing, inside bar) at the circle boundary. Place the stop beyond the circle by 0.5–1.0%.
5. 5
   Target the next inner or outer circle

   If buying at the 0.618 circle, target the 0.382 circle (inside) or the 0.786 circle (outside), depending on the direction of the reaction and the trend context.

A stock swings from $80 to $120 over 40 days, then back to $100 over the next 20 days. Apply Fibonacci Circles from the low ($80) to the high ($120). The center is at $100 (the midpoint). The half-range is $20. The 0.618 circle has a radius of 0.618×$20 = $12.36. The circle equation is: (price − $100)² + (day − 30)² = 12.36² (where day 30 is the center day).

Over the next 60 days, the stock oscillates around $100, touching the 0.618 circle four separate times at prices between $88 and $112. Each touch produces a reversal back toward $100. You can systematically trade these touches: buy at $88 (lower 0.618 circle), sell at $112 (upper 0.618 circle). Each round trip captures approximately 24 points — 27% return on the entry price.

The 0.618 circle acts as a "volatility envelope" for the stock. As long as the stock stays within this envelope, the mean-reversion strategy is valid. If the stock breaks the 0.618 circle with volume, the volatility regime has changed and the circles need to be redrawn from the new swing.

• Fibonacci arcs: Arcs and circles drawn from the same swing create intersecting curved zones. Where an arc crosses a circle, the intersection is doubly significant — a "curved-squared" harmonic zone.
• Gann square: The circular geometry of Fibonacci circles complements Gann's square-based geometry. A price that reaches a circle boundary near a Gann angle termination is in a "time-price square" — Gann's highest-probability signal.
• Horizontal S/R: The strongest circle signals occur where the circle circumference crosses a known horizontal support or resistance level. This creates a "circle-S/R cluster."
• Bollinger Bands: When price reaches the 0.618 circle and simultaneously touches the outer Bollinger Band, volatility expansion is likely. The circle validates the band's extremity.
• Volume profile: High-volume nodes at circle boundaries confirm that other market participants also see that level as significant. Low-volume crossings of a circle boundary are often false breakouts.

Fibonacci circles require solving circle-line intersection for each bar, similar to arcs, but with full 360° coverage. The center is at the midpoint of the reference swing, making the geometry symmetric in both directions.

Circle geometry computation: Given swing low (L, bar_L, price_L) and swing high (H, bar_H, price_H), the center is at C_bar = (bar_L + bar_H) / 2 and C_price = (price_L + price_H) / 2. The half-range R = (price_H − price_L) / 2. Each circle has radius rᵢ = R × ratioᵢ. At any bar x, the circle intersects price at: price_upper(x) = C_price + sqrt(max(0, rᵢ² − (x − C_bar)²)) and price_lower(x) = C_price − sqrt(max(0, rᵢ² − (x − C_bar)²)). The upper semicircle provides resistance; the lower semicircle provides support.

Mean-reversion signal generation: Generate a buy signal when price touches the lower semicircle (price_lower(x)) with a bullish rejection candle (lower wick ≥ 2× body). Generate a sell signal when price touches the upper semicircle (price_upper(x)) with a bearish rejection candle (upper wick ≥ 2× body). For a signal to be valid, price must have been inside the circle (between upper and lower boundaries) for at least 3 bars before the touch — this ensures the circle is acting as a boundary rather than price simply passing through it.

Center reversion strategy: In addition to boundary trading, program a reversion-to-center strategy. When price is at the upper or lower circle boundary, the expected move is back toward the center (C_price). The center provides a natural profit target for circle-boundary trades. The stop is placed beyond the circle boundary by 0.5× ATR. This gives a clear, mechanical system: buy at lower circle, target center, stop beyond lower circle; sell at upper circle, target center, stop beyond upper circle.

Circle trading is inherently mean-reverting. The risk management approach revolves around the assumption that price will revert toward the center — an assumption that fails during strong trends and volatility expansions.

Circle boundary break risk: A close beyond a circle boundary (above the upper circle or below the lower circle) by more than 1× ATR invalidates the mean-reversion assumption. When this happens, exit all circle-based positions immediately. The market has entered a new volatility regime. The position size for circle boundary trades should be limited to 0.5% risk because the mean-reversion assumption can fail without warning, especially during news events.

Center target sizing: The profit target is the center of the circle (midpoint of the reference swing). The distance from the upper circle to the center is R × (1 − ratio). For the 0.618 circle, the distance to center is R × (1 − 0.618) = R × 0.382. For the 0.786 circle, it is R × 0.214. Closer circles (0.618) have larger profit potential to the center than outer circles (0.786). However, outer circles are hit less frequently but offer tighter stops. Choose circles based on your preferred risk-reward profile.

Multi-circle position management: When price touches multiple circles at different levels simultaneously (e.g., 0.618 upper and 0.786 upper are close together), the nearest circle to price is the primary boundary. Enter at the primary boundary, with the secondary boundary as the invalidation level — if price breaks through both, the mean-reversion assumption is definitively broken. Scale position: 0.75× base at the primary circle, no additional at the secondary.

Circle trading requires accepting short-term losses when price breaks through a circle boundary and continues trending. The mean-reversion thesis will be wrong frequently in trending markets, and this is psychologically challenging for traders who expect each boundary touch to produce a reversal.

The "trend vs reversion" confusion: When a strong trend is underway, circle boundaries will be broken repeatedly. Traders who keep buying at the lower circle in a downtrend are "catching falling knives." The key psychological discipline is to check the higher-timeframe trend before taking a circle trade. If the daily chart shows a strong downtrend, do not buy the lower circle of a 4-hour chart — the trend will likely break through. Circle trades are for range-bound conditions only.

Center anchoring bias: Once a circle is drawn from a specific swing, traders become anchored to the center price and expect price to return to it. This anchoring bias causes traders to hold losing positions too long, waiting for a center reversion that may never come. Use a time stop: if price has not reached the center within 20 bars of the entry, exit the trade. The mean- reversion thesis has expired even if price has not yet hit the target. Time stops prevent anchoring bias from destroying your account.

The standard Fibonacci circle configuration can be adapted for specialized market analysis. Several variations enhance the tool's utility for specific conditions.

Circles as volatility cones: Instead of using circles as reversal zones, use them as volatility cones. The width between the upper and lower 0.618 circles at any point in time is the "circle width" — a measure of expected price deviation from the center. When the circle width contracts (price is near the center), volatility is low and an expansion is imminent. When the circle width expands (price is near the boundary), volatility is high and a contraction (reversal toward center) is likely. This volatility cone concept transforms the circles from a reversal tool into a volatility measurement tool.

Asymmetric circle ratios: For trending markets, use different ratios above and below the center. For an uptrend, use 0.618 for the lower (support) circle and 0.786 for the upper (resistance) circle — this acknowledges that upward moves tend to extend further than downward moves in an uptrend. For downtrends, reverse the asymmetry. Asymmetric circles adapt the tool to the directional bias while maintaining the geometric framework.

Circles on higher timeframes (weekly, monthly) define the outer harmonic boundaries of the market. The weekly 1.000 circle represents the maximum range of the dominant cycle. Daily circles operating inside the weekly 1.000 circle are "nested cycles" — shorter-term harmonics within the larger cycle.

Circle nesting: A daily circle that stays entirely within the weekly 0.618 circle is a "normal" volatility condition. If the daily circle expands beyond the weekly 0.618 circle, the market is experiencing an unusual volatility expansion that may be unsustainable. Conversely, if the daily circle contracts within the weekly 0.382 circle, the market is in a low-volatility consolidation phase.

Volatility phase analysis: Track the ratio of the daily circle radius to the weekly circle radius. A ratio between 0.3 and 0.5 indicates normal conditions. Below 0.3 indicates compression (impending breakout). Above 0.5 indicates expansion (potential climax). This ratio provides a quantitative measure of the market's harmonic state across timeframes.

Circles are mean-reversion tools. They perform best in oscillating markets where price returns to the center between swings. Their effectiveness varies with the market's tendency to revert versus trend.

Mean-reverting markets: Circles are at their most effective. Price consistently respects the 0.618 and 0.786 circles as reversal boundaries. The center acts as a magnet. Trade the circle bounces systematically. This regime occurs in low-volatility, range-bound conditions (ADX < 25).

Trending markets (ADX > 30): Circles are less effective. Price may break through multiple circles in the trend direction without pausing. The circles provide resistance but it is often broken. In trends, use circles as trailing support/resistance levels rather than reversal zones. The 0.618 circle acts as a dynamic trailing stop in a strong trend.

Volatility climax (blow-off): During a blow-off top or selling climax, price may break through all circles and continue. In these conditions, circles provide no support. Wait for the climax to end and a new swing to form before redrawing circles. The circles drawn before the climax are invalidated by the extreme move.

• 1.Fibonacci Circles — concept & usage — TradingView Help
• 2.Fibonacci Analysis — Constance Brown (2008)
• 3.Trading with Fibonacci — Carolyn Boroden (2008)
• 4.The Gann Pyramid: Square of Nine Essentials — James A. Hyerczyk (1998)
• 5.Technical Analysis of Financial Markets — John J. Murphy (1999)
• 6.New Trading Systems and Methods — Perry J. Kaufman (2013)