Trade Forex Trading

Gold Fibonacci Expansion Levels

We covered Fibonacci retracement earlier - you draw it between two points. For Fibonacci expansion, you use three chart points.

To draw these lines, we wait until the price goes back a bit and then starts to go in the original direction of the trend. The place where the price goes back to is used as point 3.

In the example below, you'll see the three points used to draw the Fibonacci extension, marked as 1, 2, and 3. Point 1 is where the trend began, 2 is where it pulled back and retraced, and 3 is where the retracement ended - just like you see in the illustration.

How to Draw Fibonacci Extension on Up Trend - How Do I Draw Fibonacci Extension Levels in Downwards Trend

Note these levels drawn above the indicator. Traders set take profits at those spots.

Drawing Extension Levels on an Upward Trend

We use Fibonacci expansion levels to guess where the price will go. The 61.80% and 100% levels are important, and we use them to decide when to take our profits.

On the examples, below you can see that the Fibonacci extension is drawn along the direction of the market trend, since the market trend is upwards - the extension is drawn upward.

These levels are represented as horizontal lines above the technical indicator, indicating the profit-taking levels. In the example provided below, had you utilized a 100% extension, you would have realized a substantial profit from the trade.

Note: 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 chart and practice these strategies.

Fibonacci Expansion Levels: How Do I Draw Fibo Expansion on Trends?

From the examples shown above, the upward trend continued, and both 61.8 % and 100.0 % levels were reached, after which the price went back down after reaching the 100.0% extension.

Drawing Extension Levels on a Downward Trend

because we use this tool to estimate/gauge take profits, how can we draw it in a downwards fashion?

We draw it from point one to two to three, as shown below. Plot this tool along the market's trend direction. In the example below, what direction did we use? Downward, yes.

Compare the illustration we provided earlier with the one presented below. In this instance, you will notice that the 100% extension level was also utilized: observe how far the price reached. This would have been an excellent take-profit area.

Fibonacci Expansion: How Do I Draw Fibonacci Extension Levels on Trends on Charts Explained?

From the example shown above, after adding this tool, there are two levels showing where to take profits, drawn as horizontal lines across the price chart for reference.

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