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.
