How to Analyze Fibonacci Expansion Levels in XAUUSD
Read Fibonacci Expansion Levels in XAUUSD
Fibonacci extension levels gold indicator is drawn using 3 chart points.
To draw Fibo Extension levels we wait until the price retracement is complete and the price begins heading in original direction of trend. Where the price pull back gets-to is used as point 3.
The Fib extension example shown below shows the 3 Chart Points where the Fibonacci extension technical indicator is plotted, marked as Chart point 1, 2 and 3. Chart point 1 is where trend started, Chart point 2 is where trend pulled back and retraced and Chart point 3 is where the price retracement reached as illustrated on the Fibonacci Extension Indicator gold trading example illustrated below.
Trade with Fib Extension?
Please note where these Fibonacci Extension levels are plotted - Fibo Extension zones are drawn above the Fibonacci Gold Technical Indicator, these are levels where trader will set the take-profit orders using these Fibonacci Expansion Levels - 61.80% and 100% Fib Extension Levels.
Drawing Fibo Extension Zones on an Upward Trend
We use Fibo extension levels to estimate where the market trend movement will get to. There are two important Fib extension levels: 61.8% and 100% Fibo Extension Areas, these are used for profit taking.
On the Fib extension example shown below you can see that the Fibonacci extension technical indicator is drawn along the direction of the trend, since the trend is upward - the Fibonacci extension indicator is also drawn upwards.
These Fibonacci extension levels are displayed as horizontal lines above Fibo Extension technical indicator, showing profit booking zones. In the example shown below if you had used of 100% Fibonacci extension you would have made nice profit from the trade setup.
Drawing Fibo Extension Zones on an Upward Trend - Fibo Extension Strategies in XAUUSD
From the above Fib extension examples, the upward trend continued and both 61.8% & 100.00% Fibonacci extension levels were all hit after which gold price retraced again after getting to the 100.0 % Fibo Extension area.
Drawing Fib Extension Areas on a Downwards Trend
Since we use this Fibonacci extension indicator tool to estimate take profit zones, how do we draw it in a downward trend?
We draw the Fibo extension indicator tool from chart point 1 to two to 3 as pictured below. Remember we always draw this Fib extension tool in the direction of the trend. In the Fib extension example illustrated below, can you figure what direction we have drawn it? That is right - downwards direction on the chart.
Try & spot difference between how we have drawn the Fibo extension above & how Fibo Extension is plotted below. This time you'd also have used Fib extension level 100 %, just where the price reached as shown on the example shown below. That would have been a good takeprofit zone.
Drawing Fibo Extension Areas on a Downward Trend - Fibo Extension Strategies in XAUUSD
From the Fibonacci extension example above, after drawing this Fibonacci extension tool there are two levels that are used to show the profit booking zones, these two Fibo extensions are plotted as horizontal lines across the price chart.
How Do You Interpret Fibonacci Expansion Levels in XAUUSD
