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Methodology for Drawing Fibonacci Expansion Levels on Bitcoin Trends, Both Upward and Downward

In our last Bitcoin trading lesson, we covered Fibonacci retracement. It uses two points on a chart. For Fibonacci expansion levels, you need three points instead.

To draw these levels we wait until the price retracement is complete and the BTCUSD cryptocurrency begins to move in the original direction of the Bitcoin price trend. Where the pull-back gets to is used as point 3.

The example laid-out below shows the 3 Points where the Fibonacci extension levels technical indicator is drawn - labeled & marked as 1, 2 and 3. Point 1 is where the market trend started, Point 2 is where the market trend started to be pulled back & retraced and Point 3 is where the price retracement reached as shown on the example laid-out below.

Drafting Fibonacci Expansion Markers for Surging and Declining Bitcoin Trajectories

BTC/USD Crypto Fibonacci Expansion Areas

Take note of the placement of Fibonacci expansion levels above the extension technical indicator. These specific points are where traders typically set their take-profit orders for better precision in their strategy.

Drawing Fibonacci Expansion Levels While Bitcoin Prices are Trending Upward

We employ Fibonacci extension levels as a mechanism to estimate or forecast the extent of price movement. Two key Fib extension levels are particularly significant: the 61.8% Fibonacci extension level and the 100% Fib extension level: these technical markers are used for establishing profit-taking targets.

In the ensuing illustration, observe that the Fibonacci extension tool is applied in the direction of the prevailing market flow: since the market is trending higher, the extension is drawn vertically upwards.

Fibonacci extension levels appear as horizontal lines above the indicator. They mark profit-taking areas. In the example below, a 100% Fib extension would yield good gains from the buy trade.

This example continues from the previous scenario, where we used a Fibonacci retracement level of 38.2% to make a buy decision. Simultaneously, the Fibonacci expansion level of 100% was utilized to determine the take profit level. Refer to a Bitcoin price chart to practice and apply these strategies.

How to Draw Fibonacci Expansion on Upward Bitcoin Trend

Fibo Extension Levels Drawn on an Upward Bitcoin Price Trend

From the samples above, the uptrend went on. Price hit the 61.8% and 100.0% Fibonacci Expansion levels. It then retraced after the 100.0% Fib extension.

How to Draw Fibonacci Expansion on a Downtrend for Bitcoin

Because we use this Fibonacci Expansion tool to guess where to take profits, how do we draw it when Bitcoin prices are going down?

We utilize the Fibonacci extension levels technical indicator by plotting from point 1 to point 2 and then to point 3, as demonstrated below. It is essential to always apply this Fibonacci Expansion tool in alignment with the prevailing market trend. In the example presented below, can you determine the direction in which we have plotted it? Correct, it is downward, as the trend is indeed downward.

Observe the distinction between how we charted it previously and how it is drawn here. In this iteration, you could have also incorporated the 100% Fib extension level: notice precisely where the market price reached. That level would have served as an excellent target for a take-profit order.

How to Draw Fibo Extension Levels on Downward Bitcoin Trend

Fibo Extension Levels Drawn on a Downward Bitcoin Price Trend

As illustrated in the earlier example, utilizing the Fibonacci expansion tool highlights two potential profit zones, represented as horizontal lines on the Bitcoin price chart, indicating the 61.8% Fibonacci expansion level and the 100% Fib extension level.

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