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