BTCUSD Trading Fib Expansion Levels
We have looked at Fib retracement in the previous lesson, drawn between two points. But to draw Fib expansion we use 3 points.
To draw these levels we wait until the retracement is complete and bitcoin price begins to move in the original and initial direction of the Bitcoin trend. Where the retracement reaches is used as point 3.
The example illustrated below shows the 3 Points where the Fib extension is drawn, marked and labeled as 1, 2 and 3. 1 is where the btcusd trend started, 2 is where the bitcoin trend pulled back and retraced & 3 is where the market retracement reached like as shown in the illustration illustrated and shown below.
Please note where these technical levels are drawn - they're drawn above the trading indicator, these are the points and levels where the trader will place the take profit orders.
Drawing Expansion Levels on an Upwards Trend
We use Fibo extension levels to estimate/gauge where the move will reach and get to. There are 2 important extension levels: 61.80 % & 100%, these are used for booking profit.
On the example, below you can see that the Fib extension is drawn along the direction of the price trend, since the bitcoin trend is upward - the extension is drawn upward.
These levels are shown as horizontal lines above the indicator, showing the profit taking levels. In the example illustrated below if you had used of 100 % extension you would have made nice profit from the trade.
NB: This is the same trade from the previous example where we used Fib retracement to buy at around retracement level 38.2 %. At the same time we have used Fibonacci extension 100% to set take profit. Now find a Bitcoin chart ==22==and practice these strategies.
From the illustrations put on display above, the upward bitcoin trend continued and both 61.8 % & 100.0 % levels were all hit after which bitcoin price retraced again after hitting the 100.0% extension.
Drawing Expansion Areas on a Downward Trend
Since we use this tool to estimate/gauge tp orders, how do we draw it in a downward Bitcoin trend?
We draw it from point 1 to 2 to 3 like as shown below. Remember we always draw this tool in direction of the trend. In the example illustrated below, can you figure out what direction we have drawn it? That is right - downwards.
Try & see the difference between how we've drawn it above & how it is drawn below. This time you would also have used extension level 100%, see just where the bitcoin price reached. That would have been a good take-profit level.
From the illustration revealed above, after plotting this tool there are 2 levels that are used to show and display the profit booking levels, these 2 are drawn as horizontal lines across the bitcoin price chart.
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