How to Trade With Fibonacci Projection - Fibonacci Projection Strategy using Fibonacci Projection Levels

What is Fibonacci Projection in Stocks?

Fibo projection is drawn using Three chart points.

To draw Fib Projection levels 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 projection example illustrated and explained below shows the 3 Chart Points where the Fibonacci projection 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 Fibonacci Projection Tool examples illustrated & described below.

Stocks Trade With Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Levels

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

Drawing Fib Projection Zones on an Upwards Stocks Trend

We use Fibo projection levels to estimate where the trend movement will reach. There are 2 important Fibonacci projection levels: 61.80% & 100% Fibonacci Projection Areas, these are used for taking profit.

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

These Fib projection levels are displayed as horizontal lines above the Fibonacci Projection technical indicator, showing profit taking areas. In the stocks example illustrated and explained 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 Upward Stocks Trend - Fibo Projection Strategies in Stocks

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

Drawing Fib Projection Areas on a Downwards Stocks Trend

Since we use this Fibonacci projection tool to estimate take profit levels, how do we draw it in a downwards Stocks 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 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 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 illustrated on the stocks example illustrated and explained below. That would have been a nice take profit area.

Drawing Fib Projection Areas on a Downwards Stocks Trend - Fibo Projection Strategies in Stocks

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