Fibonacci Projection Strategies in Commodity Trading
What's Fib Projection in Commodity Trading?
Fibo projection is drawn using Three chart points.
To draw Fibonacci Projection levels we wait until the commodity price retracement is complete and the price starts to move in original direction of the Commodity Trading trend. Where the retracement reaches is used as chart point 3.
The Fibonacci projection example shown below shows the 3 Chart Points where the Fibonacci projection technical indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the commodity trend started, Chart point 2 is where the commodity trend pulled back & retraced & Chart point 3 is where the commodity retracement reached as shown on the Fib Projection Tool example shown below.
Commodity Trade With Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Areas
Please note where these Fibonacci Projection levels are plotted - Fibo Projection zones are drawn above the Fibonacci Technical Indicator, these are points where the trader will set the take-profit orders using these Fibonacci Projection Levels - 61.80% & 100% Fib Projection Levels.
Drawing Fib Projection Zones on an Upwards Commodities Trading Trend
We use Fibo projection levels to estimate where the trend movement will reach. There are Two important Fib projection levels: 61.80% & 100% Fibonacci Projection Levels, these are used for taking profit.
On the Fibonacci projection example shown below you can see that the Fibonacci projection technical indicator is drawn along the direction of the trend, since the trend is upward - the Fibonacci projection is drawn upward.
These Fibonacci projection areas are shown as horizontal lines above the Fib Projection technical indicator, showing profit taking areas. In the commodities trading example shown 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 Upward Commodity Trading Trend - Fib Projection Strategies in Commodity Trading
From the above Fibonacci projection examples, the upward trend continued & both 61.80% & 100.00% Fibonacci projection levels were all hit after which commodity price retraced again after getting to the 100.00% Fibo Projection level.
Drawing Fib Projection Levels on a Downwards Commodities Trading Trend
Since we use this Fib projection tool to estimate take profit levels, how do we draw it in a downward Commodity Trading trend?
We draw the Fibonacci projection indicator from chart point 1 to 2 to 3 as shown below. Remember we always plot this Fibonacci projection tool in the direction of the trend. In the Fibonacci projection example shown below, can you figure what direction we have drawn it? That is right - downwards direction.
Try & spot 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 illustrated on the commodities trading example shown below. That would have been a nice take profit area.
Drawing Fib Projection Levels on a Downward Commodity Trading Trend - Fib Projection Strategies in Commodity Trading
From the Fibonacci projection example above, after drawing this Fibonacci projection tool there are 2 levels that are used to show the profit-taking areas, these two Fibonacci projection levels are drawn as horizontal lines across the commodity price chart.
