What is Difference between Fibo Retracement and Fibonacci Extension?

How to use Fibo Retracement & Extension & the Difference between Fibo Retracement and Extension

Gold Fib Retracement Areas

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

Fibo Retracement Level example shown below where the trend is moving down between Chart point 1 and Chart point 2, then after Point 2 the trading price retraces then it continues moving upwards in the original upward trend. Note that this Fibonacci Retracement Levels indicator is plotted from Chart point 1 to Chart point two in the direction of the trend.

Fibonacci Retracement Levels - How to Draw Fibo Retracement Levels

Fibo Extension Levels

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

To draw these Fibo Extension levels we wait until the price retracement is complete & the price starts to head in original direction of trend. Where the retracement reaches is used as chart point Three for Fibo extension.

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

Fibo Extension Levels - How to Draw Fibo Extension Zones

Please take note where these Fib Extension levels are plotted - Fibo Extension zones are drawn above the Fibo Extension indicator tool, these are the points where one will set the take-profit orders.