How to Draw Fib Extension - How to Draw Fibonacci Extension Indicator on Forex Charts

How Do You Use Fibonacci Extension Levels on Forex Chart?

We use Fibonacci Extension levels to estimate where the trend movement will reach. There are 2 important Fibo Extension areas: 61.8% & 100% Fibonacci Extension Levels, these are used for taking profit.

To draw Fibonacci Extension levels on the forex chart we wait until the price retracement is complete & the price starts to move in original direction of the Forex trend. Where the price retracement reaches is used as chart point 3. Fibonacci Extension Indicator is drawn using 3 chart points as illustrated on the example below of how to draw the Fibo Extension Technical Indicator Tool.

The Fibonacci Extension example below shows the 3 Chart Points where the Fibo Extension technical indicator is plotted, marked as Chart point 1, Chart point 2 & Chart point 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 Extension Technical Indicator Tool example below.

How to Trade with Fibonacci Extension? - How to Draw Fibonacci Extension Levels on Forex Charts

Please note where these Fibonacci Extension levels are plotted - Fibonacci Extension zones are plotted above the Fibonacci indicator, these are chart points where one will set takeprofit orders using these Fib Extension Levels - 61.80% and 100.00% Fibonacci Extension Levels.

Drawing Fibo Extension Zones on an Upwards Forex Trend

We use Fibonacci Extension levels to estimate where the trend movement will reach. There are 2 important Fibo Extension areas: 61.80% Forex Fibonacci Extension Level and 100% Fibonacci Extension Level, these Fib Extension Levels are used for taking profit.

On the Fibonacci Extension indicator example below you can see that the Fibonacci Extension technical indicator tool is drawn along the direction of the trend, since the trend is upward - the Fibonacci Extension technical indicator is plotted upwards.

These Fibonacci Extension zones are displayed as horizontal lines above the Fib Extension technical indicator, showing profit-taking areas. In the forex trading example below if you had used of 100.0% Fibonacci Extension level you would have made good profit from using this setup.

Drawing Fibonacci Extension Indicator on an Upward Forex Trend - Fibonacci Extension Tool

From the above Fibonacci Extension indicator example, upward trend continued and both 61.8% & 100.0% Fibo Extension zones were all hit after which price retraced again after getting to the 100.00% Fibo Extension level.

Drawing Fibonacci Extension Areas on a Downwards Forex Trend

Since we use the Fibonacci Extension indicator tool to estimate take profit levels, how do we draw Fibonacci Extension in a downward Forex trend?

We draw the Fibo Extension indicator tool from chart point 1 to chart point 2 to chart point 3 as displayed on the example below. Remember we always plot this Fibonacci Extension tool in the direction of the trend. In the Fibonacci Extension example below, can you figure what is direction that we have drawn it? That is right - downwards direction.

Try and spot the difference between how we have drawn Fibo Extension indicator above and how Fibo Extension technical indicator is plotted below. This time you would also have used Fibonacci Extension level 100.00%, just where the price reached as illustrated on the example below. That would have been a good take profit area.

Drawing Fibonacci Extension Indicator on a Downward Forex Trend - Fibonacci Extension Tool

From the Fibonacci Extension indicator example above, after drawing this Fibonacci Extension tool there are 2 levels that are used to show the profit-taking areas, these 2 Fibonacci Extension levels are plotted as horizontal lines across the forex price chart marked as 61.8% Forex Fibo Extension Level and 100% Fibonacci Extension Level.