How Do I Trade with Fibonacci Expansion?
Fibo expansion is drawn using 3 chart points.
To draw Fibonacci Expansion levels we wait until the xauusd price retracement is complete & the xauusd price starts to move in 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 technical 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 & Chart point 3 is where the gold retracement reached as displayed on the Fibonacci Expansion Tool example illustrated and explained below.
How Do You Trade with Fibonacci Expansion?
Please note where these Fibonacci Expansion zones are plotted - Fibo Expansion zones are drawn above the Fibonacci Technical Indicator, these are the points where the trader will set the takeprofit orders using these Fibonacci Expansion Levels - 61.80% and 100% Fibo Expansion Levels.
Drawing Fib Expansion Levels on an Upwards XAUUSD 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 illustrated and explained below you can see that the Fibonacci expansion technical 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 xauusd example illustrated & explained below if you had used 100% Fibonacci expansion you would have made a good profit from this trade setup.
Drawing Fibonacci Expansion Levels on an Upwards Gold Trend - Fibonacci Expansion Strategies in Gold Trading
From the above Fibonacci expansion examples, the upward trend continued and both 61.8% & 100.00% Fibonacci expansion levels were all hit after which xauusd trading price retraced again after getting to the 100.0 % Fibonacci Expansion level.
Drawing Fib Expansion Areas on a Downwards XAUUSD Trend
Since we use this Fibonacci expansion tool to estimate take profit levels, how do we draw it in a downwards Gold trend?
We draw the Fibonacci expansion indicator from chart point 1 to 2 to 3 as shown below. Remember we always draw this Fib expansion tool in 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 identify the difference between how we have plotted 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 illustrated on the xauusd trading examples illustrated and explained below. That would have been a nice take profit area.
Drawing Fibonacci Expansion Areas on a Downwards Gold 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 xauusd trading price chart.
