Fibonacci Trading

Price Retracement Levels

0.236, 0.382, 0.500, 0.618, 0.764

Price Extension Levels

0, 0.382, 0.618, 1.000, 1.382, 1.618

Fibonacci Retracement Levels

In an uptrend, the general idea is to go long the market on a retracement to a Fibonacci support level. The price retracement levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent potential Swing High and clicking there. This will display each of the Retracement Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend.

Example 1 (Screenshot from eToro web app)

Example 1: Now let’s look at what actually happened after the Swing High occurred. The market pulled back right through the 0.382 level and continued through the 0.5 level before finding support. After that, the market resumed its upward move. Clearly buying at the 0.5 level would have been a good trade.

Example 2: The market pulled back right through the 0.382 level, however, once the selling power was exhausted, the market continued to retrace all the way up through 0.5 level before resuming its downward trend. In this case, selling at the 0.5 level would have been a good trade.

Example 2 & Example 3 (Screenshot from eToro web app)

Example 3: This is the same trade above where we used retracement to add more to the short positions at around retracement 61.8%. At the same time, we have used an expansion of 100% to take profit. You can see the downward trend continued and both Expansions 38.2.8% and 61.8 % were all hit and going towards the 100.0% Extension Levels.

Fibonacci Price Extension Levels

In an uptrend, the general idea is to take profits on a long trade at a Fibonacci Price Extension Resistance Level. The Price Extension Levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent Swing High. Then by clicking on the Swing High and back down to the retracement Swing Low and clicking there. This will display each of the Extension Levels showing both the ratio and corresponding price level. Look at example 3 in a downtrend. The same points made by these examples are equally applicable to markets in an uptrend.