What is the Difference between XAUUSD Fibonacci Retracement and XAUUSD Fibonacci Extension?
How to use Fibonacci Retracement and Extension and the Difference between Fibonacci Retracement and Extension
Gold Trading Fib Retracement Levels
Fibonacci retracement is drawn between 2 chart points but Fibonacci extension is drawn using 3 chart points.
Fibonacci Retracement Level example illustrated and explained below where the gold trend is moving down between Chart point 1 and Chart point 2, then after Chart point 2 the xauusd trading price retraces then it continues moving upward in the original upward trend. Note that this Fibonacci Retracement Levels indicator is drawn from Chart point 1 to Chart point 2 in the direction of the xauusd market trend.
Fibonacci Retracement Levels - How to Draw Fibonacci Retracement Levels
Fibonacci Extension Levels
Fibonacci retracement is drawn between 2 chart points but Fibonacci extension is drawn using 3 chart points.
To draw these Fibonacci Extension 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 for Fibonacci extension.
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 retracement reached as shown on the Fibonacci Extension example illustrated and explained below.
Fibonacci Extension Levels - How to Draw Fibonacci Extension Levels
Please note where these Fibonacci Extension levels are drawn - Fibonacci Extension levels are drawn above the Fibonacci Extension indicator, these are the points where a trader will set the take profit orders.