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How Do I Trade with Fibonacci Extension?

Fibonacci Extension Strategies in XAUUSD Trading

Fibonacci expansion levels trading indicator is drawn using Three chart points.

To draw Fibonacci Extension areas we wait until the price retracement is complete and price begins to move in original and initial direction of the trend. Where the market retracement reaches is used as the chart point 3.

The Fib extension exemplification illustrated and shown & explained below portrays the 3 Points where the Fib extension indicator is drawn, labeled as Chart point 1, 2 & 3. Point 1 is where the trend started, Point 2 is where the market trend pulled back and retraced & Chart point 3 is where the market retracement reached just as displayed on the Fib Expansion Indicator example illustration depicted & explained below.

How to Trade with Fib Extension - Fib Extension Levels Strategy using Fibonacci Extension Levels

How Do You Trade with Fib Extension?

Please note where these Fib Expansion levels are drawn - Fib Extension levels are drawn above the Fib Indicator, these are the levels where the Gold trader will place the take-profits using these Fib Expansion Levels - 61.8% & 100% Fib Expansion Levels.

Drawing Fibonacci Extension Zones on an Upwards Trend

We use Fibonacci extension levels to try to estimate where market trend movement will reach and get to. There are 2 critical and crucial Fib extension levels: 61.8% & 100% Fib Expansion Areas, these are used for booking profit.

On the Fib extension exemplification illustrated and shown & explained below you can see that the Fib extension indicator is drawn along the direction of the trend, since the trend is upwards - the Fib extension is also drawn upwards.

These Fib expansion levels are displayed as horizontal lines above Fib Extension indicator, showing profit taking areas. In the examples illustrated and shown & described below if you had used the 100% Fibo extension you would have made nice profit from using this setup.

How Do I Trade with Fib Extension? - Fib Extension Levels Strategy using Fibonacci Extension

Drawing Fibonacci Extension Zones on an Upwards Trend - Fib Extension Strategies in Gold Trading

From the above Fib expansion examples, the upward trend continued & both 61.80% & 100.00% Fib extension levels were all hit after which price retraced again after getting to the 100.0 percent Fibonacci Extension level.

Drawing Fibonacci Extension Levels on a Downward Trend

Since we use this Fibo extension tool to estimate takeprofit areas, how do we draw it in a downwards trend?

We draw the Fib extension indicator from chart point 1 to 2 to Three just as is illustrated below. Remember we always draw this Fib extension tool in the direction of the trend. In the Fib expansion exemplification illustrated & explained below, can you figure what direction we've drawn it? That is right - downwards direction.

Try & spot difference between how we've drawn the Fib extension above and how Fibonacci Extension is drawn below. This time you'd also have used Fibonacci extension area 100 percent, just where the price reached just as shown on the example illustration displayed & described below. That would have been a nice take profit area.

How Do I Trade with Fib Extension Levels? - Fib Extension Strategy using Fibonacci Extension

Drawing Fibonacci Extension Levels on a Downward Trend

From the Fib expansion illustration above, after drawing this Fib 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 price chart.

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