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What's Difference between Fibonacci Retracement and Fibonacci Expansion?

XAU/USD Fibonacci Retracement Levels

Fibonacci retracement is drawn between 2 points but Fibonacci expansion is drawn using 3 chart points.

Fibonacci Retracement example shown & described below where the trend is moving down between Chart point 1 & Chart point 2, then after Point 2 the price retraces then it continues moving upward in the initial upward trend. Note that this Fib Retracement indicator is drawn from Chart point 1 to Chart point two in the direction of the market trend.

How to Use Fibonacci Retracement Levels Technical Indicator on MT5 Platform Software

Fibonacci Retracement Levels - How to Draw Fibonacci Retracement Zones

Gold Fibo Extension Levels

Fibonacci retracement is drawn between 2 points but Fibonacci expansion is drawn using 3 chart points.

To draw these Fib Expansion areas we wait until the price retracement is complete and the price begins to head in original and initial direction of trend. Where the market retracement reaches is used as chart point 3 for Fib expansion.

The Fibonacci Expansion exemplification shown & described below displays the 3 chart Points where the Fib Expansion indicator is plotted, labeled as point 1, 2 & 3. Point 1 is where trend begun, Point 2 is where trend pulled back & retraced & Chart point 3 is where the market retracement reached as shown & illustrated in Fibonacci Extension exemplification shown and explained below.

How to Draw Fibo Indicator in Down Trend Trading Price Chart

Fibo Expansion Levels - How to Draw Fibo Extension Levels

Please note where these Fibonacci Expansion levels are drawn - Fibo Extension levels are drawn above the Fib Expansion indicator, these are the levels where a trader will place the take profits.

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