How Do You Trade with Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Levels - Fibonacci Projection Strategies in Forex Trading
What's Fib Projection in Forex Trading?
Fibo projection is drawn using 3 chart points.
To draw Fibonacci Projection 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 projection example below shows the 3 Chart Points where the Fibonacci projection 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 & retraced and Chart point 3 is where the forex retracement reached as illustrated on the Fib Projection Tool example below.
How Do You Trade with Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Levels
Please note where these Fibonacci Projection areas are plotted - Fibonacci Projection zones are plotted above the Fibo Indicator, these are the points where the trader will place the takeprofit orders using these Fibonacci Projection Levels - 61.80% and 100% Fibonacci Projection Levels.
Drawing Fibonacci Projection Zones on an Upwards Forex Trend
We use Fibo projection levels to estimate where the trend movement will reach. There are 2 important Fib projection levels: 61.80% and 100% Fibo Projection Levels, these are used for taking profit.
On the Fibonacci projection example below you can see that the Fibonacci projection technical indicator is plotted along the direction of the trend, since the trend is upward - the Fibo projection is drawn upward.
These Fibonacci projection levels are displayed as horizontal lines above the Fib Projection indicator, showing profit taking areas. In the example below if you had used of 100% Fibonacci projection you would have made nice profit from the trade set-up.
Drawing Fib Projection Zones on an Upwards Forex Trend - Fibonacci Projection Strategies in Forex Trading
From the above Fibonacci projection examples, the upward trend continued & both 61.80% and 100.00% Fibonacci projection levels were all hit after which price retraced again after getting to the 100.00% Fibonacci Projection level.
Drawing Fibonacci Projection Areas on a Downwards Forex Trend
Since we use this Fib projection tool to estimate take profit levels, how do we draw it in a downward Forex trend?
We draw the Fibonacci projection indicator from chart point 1 to 2 to 3 as shown below. Remember we always draw this Fibonacci projection tool in direction of the trend. In the Fibonacci projection 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 projection above and how Fibonacci Projection is drawn below. This time you would also have used Fibonacci projection level 100%, just where the price reached as shown on example below. That would have been a nice take profit area.
Drawing Fib Projection Areas on a Downwards Forex Trend - Fibonacci Projection Strategies in Forex
From the Fibonacci projection example above, after plotting this Fibonacci projection tool there are 2 levels that are used to show the profit taking areas, these two Fibonacci projection levels are plotted as horizontal lines across the forex price chart.
