How Do You Trade with Fibonacci Expansion?

Fibo expansion is drawn using 3 chart points.

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

The Fibonacci expansion example depicted and explained below highlights the Three Chart Points where the Fibonacci expansion technical indicator is plotted, marked as Chart point 1, 2 and 3. Chart point 1 is where the trend started, Chart point 2 is where the trend pulled back & retraced and Chart point 3 is where the retracement reached as portrayed on the Fibonacci Expansion Tool example depicted and explained below.

How Do I Trade with Fibonacci Expansion?

Please note where these Fibonacci Expansion levels are drawn - Fibo Expansion levels are drawn above the Fibonacci Indicator, these are the points where the trader will set the takeprofit orders using these Fibonacci Expansions - 61.80% and 100% Fibo Expansion Levels.

Drawing Fib Extension Levels on an Upwards Trend

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

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

These Fibonacci expansion levels are displayed as horizontal lines above the Fibonacci Expansion technical indicator, showing profit taking areas. In the example illustrated & explained below if you had used 100% Fibonacci expansion you would have made a good profit from this trade setup.

Drawing Fibonacci Expansions on an Upwards Trend - Fibo Expansion Strategies in Gold Trading

From the above Fibonacci expansion examples, the upward trend continued and both 61.8 % & 100.00% Fibo expansion levels were all hit after which price retraced again after getting to the 100.0 percent Fibo Expansion zone.

Drawing Fib Expansion Areas on a Downwards Trend

Since we use this Fibonacci expansion tool to estimate take profit levels, how do we draw it in a down-wards trend?

We draw the Fibonacci expansion indicator from chart point 1 to two to Three as pictured below. Remember we always draw this Fib expansion tool in direction of the trend. In the Fibonacci expansion example depicted and explained below, can you figure what direction we have drawn it? That is right - down-wards direction.

Try and identify the difference between how we have drawn Fibonacci expansion above and how Fibonacci Expansion is drawn below. This time you'd also have used Fibonacci expansion zone 100 %, just where price reached as shown on the examples illustrated and explained below. That would have been a nice take profit area.

Drawing Fibonacci Expansion Areas on a Downwards Trend

From Fibonacci expansion examples above, after plotting this Fib expansion tool there are two levels which are used to show the profit taking areas, these 2 Fibo expansion levels are drawn as horizontal lines across the price chart.