How to Draw Fibonacci Stock Trading Projection Indicator
How Do I Use Stocks Fibo Projection Levels on Stocks Chart?
We use Fibonacci Projection levels to estimate where the stock trend movement will reach. There are Two important Fibonacci Projection levels: 61.8% & 100% Fib Projection Levels, these are used for profit taking.
To draw Fibonacci Projection levels on stock chart we wait until the stocks price retracement is complete and the stocks price starts to move in the original direction of the Stock trend. Where the stocks price retracement reaches is used as chart point 3. Fib Projection Technical Indicator is plotted using 3 chart points as illustrated and shown on stocks trading example illustrated & explained below of how to plot the Fib Projection Indicator Tool.
The Fib Projection examples explained below shows the Three Chart Points where the Fib Projection indicator is drawn, marked as Chart point 1, Chart point 2 and Chart point 3.
Chart point 1 is where the stock trend started, Chart point 2 is where the stock trend pulled back & retraced and Chart point 3 is where the stock retracement reached as displayed on the Fib Projection Technical Indicator Tool examples illustrated and described below.
How to Trade With Fibonacci Projection - How to Draw Fibonacci Projection Levels on Stock Charts
Please note where these Fibonacci Projection areas are drawn - Fib Projection levels are plotted above the Fibo indicator, these are the chart points where a trader will place the takeprofit orders using these Fib Projection Levels - 61.80% and 100.00% Fibonacci Projection Areas.
Drawing Fibo Projection Levels on an Upward Stock Trend
We use Fibonacci Projection levels to estimate where the stock trend movement will reach. There are Two important Fibonacci Projection levels: 61.8%Fibonacci Projection Level and 100% Fibonacci Projection Level, these Fibonacci Projection Levels are used for taking profit.
On the Fibonacci Projection technical indicator example illustrated and explained below you can see that the Fibonacci Projection technical indicator is plotted along the direction of the stock trend, since the stock trend is upward - the Fibonacci Projection technical indicator is drawn upwards.
These Fibonacci Projection levels are displayed as horizontal lines above the Fibo Projection technical indicator, showing the profit-taking areas. In the stocks example illustrated & described below if you had used 100.00% Fibonacci Projection level the you would have made a good profit from the trade set-up.
Drawing Fibo Projection Indicator on an Upward Stock Trend - Fib Projection Tool
From the above Fibonacci Projection technical indicator examples, the upwards stock trend continued and both 61.8% & 100.00% Fibonacci Projection levels were all hit after which stocks price retraced again after getting to the 100.0% Fibo Projection level.
Drawing Fibo Projection Areas on a Downward Stock Trend
Since we use the Fib Projection technical indicator to estimate take profit levels, how do we draw Fibonacci Projection in a downward Stock trend?
We draw the Fibo Projection tool from chart point 1 to chart point 2 to chart point 3 as illustrated and shown on stocks trading examples illustrated and described below. Remember we always draw this Fibonacci Projection tool in direction of the stocks trend. In the Fibonacci Projection example illustrated and explained below, can you figure what direction we have drawn it? That's right - downwards direction.
Try & identify the difference between how we have plotted Fibonacci Projection technical indicator above and how Fibonacci Projection technical indicator is drawn below. This time you would also have used Fibonacci Projection level 100.0%, just where the stocks price reached as illustrated on the stocks trading examples illustrated and explained below. That would have been a good take profit area.
Drawing Fibo Projection Indicator on a Downward Stock Trend - Fib Projection Tool
From the Fibonacci Projection technical indicator 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 areas are drawn as horizontal lines across the stock price chart marked as 61.8%Fibo Projection Level and 100% Fibonacci Projection Level.
