How to Analyze the Difference between Fibo Retracement Levels & Fib Extensions in XAUUSD

How to Read the Difference between Fibo Retracement Levels & Fib Extensions in XAUUSD

Fibonacci Retracement Levels in XAUUSD

Fibonacci retracement is plotted between 2 chart points but Fib extension is plotted using 3 chart points.

Fibonacci Retracement Level example shown below where the market trend is heading down between Chart point 1 & Chart point 2, then after Point 2 the price retraces then it continues moving upward in the original upwards trend. Note that this Fibonacci Retracement Levels is drawn from Chart point 1 to Chart point 2 in the direction of the market trend.

Fibonacci Retracement Levels - How Do You Draw Fibo Retracement Levels

Fibonacci Extension Levels in XAUUSD

Fibonacci retracement is plotted between 2 chart points but Fibo extension is plotted using 3 chart points.

To draw these Fib Extension levels we wait until the price retracement is complete and the price starts to head in original direction of trend. Where the price retracement reaches is used as chart point 3 for fibonacci extension in xauusd.

The Fib Extension example shown below shows the 3 chart Points where the Fib Extension indicator tool is drawn, labeled as chart point 1, 2 & 3. Point 1 is where the market trend started, Point 2 is where the trend pulled back & retraced & Chart point 3 is where the price retracement reached as shown on the Fib Extension example illustrated below.

Fibonacci Extension Levels - How Do You Draw Fibo Extension Zones

Please note where these Fibo Extension levels are plotted - Fibonacci Extension zones are drawn above the Fib Extension indicator tool, these are the points where a trader will set the xauusd takeprofit orders.

How Do You Interpret the Difference between Fibo Retracement Levels & Fib Extensions in XAUUSD