Fibonacci Projection Strategies in CFD
What is Fibonacci Projection in CFD?
Fibo projection is drawn using 3 chart points.
To draw Fib Projection levels we wait until the cfd price retracement is complete & the price starts to move in original direction of the CFD trend. Where the retracement reaches is used as chart point 3.
The Fibonacci projection example explained and illustrated below shows the 3 Chart Points where the Fibonacci projection indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the cfd trend started, Chart point 2 is where the cfd trend pulled back & retraced and Chart point 3 is where the cfd retracement reached as illustrated on the Fibonacci Projection Tool examples explained and illustrated below.
CFD Trade With Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Areas
Please note where these Fib Projection levels are plotted - Fibonacci Projection zones are plotted above the Fibo Indicator, these are points where the trader will place the take-profit orders using these Fib Projection Levels - 61.80% and 100% Fibonacci Projection Levels.
Drawing Fibonacci Projection Zones on an Upwards CFD Trend
We use Fibo projection levels to estimate where the trend movement will reach. There are 2 important Fibonacci projection levels: 61.80% and 100% Fibo Projection Levels, these are used for taking profit.
On the Fib projection examples explained below you can see that the Fibonacci projection technical indicator is drawn along the direction of the trend, since the trend is upward - the Fib projection is drawn upwards.
These Fib projection levels are displayed as horizontal lines above the Fibonacci Projection technical indicator, showing profit taking areas. In the cfd example explained and illustrated below if you had used of 100% Fibonacci projection you would have made nice profit from the trade setup.
Drawing Fib Projection Zones on an Upwards CFD Trend - Fibonacci Projection Strategies in CFD
From the above Fibonacci projection examples, the upward trend continued & both 61.80% and 100.0% Fibonacci projection levels were all hit after which cfd price retraced again after getting to the 100.0% Fibonacci Projection level.
Drawing Fibonacci Projection Levels on a Downwards CFD Trend
Since we use this Fibonacci projection tool to estimate take profit levels, how do we draw it in a downwards CFD trend?
We draw the Fibonacci projection indicator from chart point 1 to 2 to 3 as displayed below. Remember we always plot this Fibo projection tool in the direction of the trend. In the Fib projection examples explained below, can you determine what direction we have plotted it? That's right - downward direction.
Try & spot the difference between how we have drawn Fibonacci projection above and how Fibonacci Projection is drawn below. This time you would also have used Fibonacci projection level 100%, just where the price reached as shown on the cfd example explained and illustrated below. That would have been a nice take profit area.
Drawing Fib Projection Levels on a Downward CFD Trend - Fibonacci Projection Strategies in CFD
From the Fibonacci projection example above, after drawing this Fibonacci projection tool there are two levels that are used to show the profit-taking areas, these two Fibonacci projection levels are drawn as horizontal lines across the cfd price chart.
