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