How Do I Trade with Fibonacci Expansion?
Fibonacci expansion is drawn using 3 chart points.
To draw Fibonacci Expansion levels we wait until the xauusd trading price retracement is complete and the xauusd trading price starts to move in the original direction of the Gold trend. Where the retracement reaches is used as chart point 3.
The Fibonacci expansion example illustrated and explained below shows the 3 Chart Points where the Fibonacci expansion indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the gold trend started, Chart point 2 is where the gold trend pulled back and retraced and Chart point 3 is where the gold retracement reached as shown on the Fibonacci Expansion Tool example illustrated and explained below.
How Do I Trade with Fibonacci Expansion?
Please note where these Fibonacci Expansion levels are drawn - Fibonacci Expansion levels are drawn above the Fibonacci Indicator, these are the points where the gold trader will set the take profit orders using these Fibonacci Expansion Levels - 61.8% and 100% Fibonacci Expansion Levels.
Drawing Fib Expansion Levels on an Upward XAUUSD Trend
We use Fibonacci expansion levels to estimate where the trend movement will reach. There are 2 important Fibonacci expansion levels; 61.8% and 100% Fibonacci Expansion Levels, these are used for taking profit.
On the Fibonacci expansion example illustrated and explained below you can see that the Fibonacci expansion indicator is drawn along the direction of the trend, since the trend is upwards - the Fibonacci expansion is drawn upwards.
These Fibonacci expansion levels are displayed as horizontal lines above the Fibonacci Expansion indicator, showing profit taking areas. In the xauusd trading example illustrated and explained below if you had used of 100% Fibonacci expansion you would have made nice profit from the trade setup.
Drawing Fibonacci Expansion Levels on an Upward Gold Trend - Fibonacci Expansion Strategies in Gold Trading
From the above Fibonacci expansion examples, the upward trend continued and both 61.8% and 100.0% Fibonacci expansion levels were all hit after which xauusd trading price retraced again after hitting the 100.0 % Fibonacci Expansion level.
Drawing Fib Expansion Levels on a Downward XAUUSD Trend
Since we use this Fibonacci expansion tool to estimate take profit levels, how do we draw it in a downward Gold trend?
We draw the Fibonacci expansion indicator from chart point 1 to 2 to 3 as shown below. Remember we always draw this Fibonacci expansion tool in the direction of the trend. In the Fibonacci expansion example illustrated and explained below, can you figure what direction we have drawn it? That is right - downwards direction.
Try and spot the difference between how we have drawn Fibonacci expansion above and how Fibonacci Expansion is drawn below. This time you would also have used Fibonacci expansion level 100%, just where the price reached as shown on the xauusd trading example illustrated and explained below. That would have been a nice take profit area.
Drawing Fibonacci Expansion Levels on a Downward Gold Trend
From the Fibonacci expansion example above, after drawing this Fibonacci expansion tool there are two levels that are used to show the profit taking areas, these two Fibonacci expansion levels are drawn as horizontal lines across the xauusd trading price chart.
