How to Trade With Stocks Fibonacci Extension

Stocks Fibonacci Extension Strategies in Stocks

Fibo extension levels indicator is drawn using Three chart points.

To draw Stocks Fibo Extension zones we wait until the stocks price retracement is complete and the price starts to move in original direction of the Stocks trend. Where the retracement reaches is used as chart point 3.

The Fibonacci extension example illustrated and explained below shows the 3 Chart Points where the Fibonacci extension indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the stocks trend started, Chart point 2 is where the stocks trend pulled back & retraced & Chart point 3 is where the stocks retracement reached as shown on the Stocks Fibonacci Extension Indicator examples illustrated & described below.

Stocks Trade With Stocks Fibonacci Extension?

Please note where these Stocks Fib Extension areas are drawn - Stocks Fib Extension zones are plotted above the Fibonacci Indicator, these are the points where the trader will place the takeprofit orders using these Stocks Fibo Extension Levels - 61.80% & 100% Stocks Fibo Extension Areas.

Drawing Fibo Extension Zones on an Upward Stock Trend

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

On the Fibonacci extension example illustrated and explained below you can see that the Fibonacci extension technical indicator is plotted along the direction of the trend, since the trend is upward - the Fibonacci extension is also drawn upwards.

These Fibo extension levels are displayed as horizontal lines above the Stocks Fibo Extension technical indicator, showing profit taking areas. In the stocks example illustrated and explained below if you had used of 100% Fibonacci extension you would have made nice profit from the trade set-up.

Drawing Fibo Extension Zones on an Upward Stocks Trend - Stocks Fibonacci Extension Strategies in Stocks

From the above Fibonacci extension examples, the upward trend continued & both 61.80% & 100.0% Fibonacci extension levels were all hit after which stocks price retraced again after getting to the 100.0 % Stocks Fibonacci Extension level.

Drawing Stocks Fib Extension Levels on a Downward Stocks Trend

Since we use this Fibonacci extension indicator to estimate take profit levels, how do we draw it in a downward trend?

We draw the Fibonacci extension indicator from chart point 1 to 2 to 3 as shown below. Remember we always draw this Fibonacci extension tool in direction of the trend. In the Fibonacci extension example illustrated and explained below, can you figure what direction we have drawn it? That is right - downwards direction.

Try & identify the difference between how we have drawn the Fibo extension above and how Stocks Fibonacci Extension is drawn below. This time you would also have used Fibonacci extension level 100%, just where the price reached as illustrated on the stocks example illustrated and explained below. That would have been a nice take profit area.

Drawing Fibo Extension Levels on a Downward Stocks Trend - Stocks Fibonacci Extension Strategies in Stocks

From the Fibonacci extension example above, after plotting this Fibonacci extension tool there are two levels that are used to show the profit taking areas, these two Fibonacci extension levels are drawn as horizontal lines across the stocks price chart.