How Do I Trade with Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Levels
What's Fib Projection in XAUUSD Trading?
Fibo projection is drawn using 3 chart points.
To draw Fibonacci Projection levels we wait until the xauusd price retracement is complete & the price starts to move in original direction of the Gold trend. Where the retracement reaches is used as chart point 3.
The Fibonacci projection example illustrated and explained below shows the 3 Chart Points where the Fibonacci projection 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 & retraced and Chart point 3 is where the gold retracement reached as illustrated on the Fib Projection Tool example illustrated & described below.
Gold Trade with Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Levels
Please note where these Fibonacci Projection levels are plotted - Fibonacci Projection zones are plotted above the Fibo Indicator, these are the points where the trader will place the take-profit orders using these Fibonacci Projection Levels - 61.80% and 100% Fibonacci Projection Levels.
Drawing Fibonacci Projection Zones on an Upwards Gold Trend
We use Fibo projection levels to estimate where the trend movement will reach. There are Two important Fib projection levels: 61.80% and 100% Fibo Projection Levels, these are used for taking profit.
On the Fibonacci projection example illustrated and explained below you can see that the Fibonacci projection technical indicator is drawn along the direction of the trend, since the trend is upward - the Fibo projection is drawn upward.
These Fibonacci projection areas are shown as horizontal lines above the Fib Projection technical indicator, showing profit taking areas. In the xauusd example illustrated & explained below if you had used 100% Fibonacci projection you would have made nice profit from the trade setup.
Drawing Fibo Projection Zones on an Upward Gold Trend - Fibonacci Projection Strategies in Gold Trading
From the above Fibonacci projection examples, the upward trend continued & both 61.80% and 100.00% Fibonacci projection levels were all hit after which xauusd price retraced again after getting to the 100.00% Fibonacci Projection level.
Drawing Fibonacci Projection Levels on a Downwards Gold Trend
Since we use this Fib projection tool to estimate take profit levels, how do we draw it in a downward Gold trend?
We draw the Fibonacci projection indicator from chart point 1 to 2 to 3 as shown below. Remember we always draw this Fibonacci projection tool in the direction of the trend. In the Fibonacci projection 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 plotted Fibonacci projection above and how Fibonacci Projection is drawn below. This time you would also have used Fibonacci projection level 100%, just where the price reached as shown on the xauusd example illustrated & described below. That would have been a nice take profit area.
Drawing Fibo Projection Levels on a Downwards Gold Trend
From the Fibonacci projection example above, after drawing this Fibonacci projection tool there are 2 levels that are used to show the profit-taking areas, these two Fibonacci projection levels are drawn as horizontal lines across the xauusd price chart.
