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