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Chapter 10, Part VII. Fibonacci Extensions.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Jun 21, 2011.

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  1. Administrator

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    Part VII. Fibonacci Extensions. [​IMG]
    Commander in Pips: Greetings. In all previous parts of the current chapter we’ve talked about Fibonacci retracement – levels that could hold the market during retracement in the opposite direction to the initial swing. As you know, we use these levels for opening positions in the direction of the initial thrust with the hope that the market will continue this move after retracement. Today we will talk about how to estimate the target of this possible move after retracement.

    Pipruit: Good morning, Sir. Let’s assume that we have an initial thrust up, then retracement where we’ve opened Long position from some Fib level and market continues its move up, as we’ve expected. And now we have to estimate the possible target of this continuation move up, right?​

    [​IMG]

    Commander in Pips: Yes, that’s correct. The target could be estimated with applying Fibonacci Extensions or Expansion – sometimes this tool is called like that. These are, in fact, the same.

    Pipruit: And why do we need that?​

    Commander in Pips: We may use this tool to estimate the area where the market could show some pause in a move, retracement or even a reversal. So, if we have position open already – this tool can show us level where we can take our profit or place a “Take profit” order. Also this tool has some advanced application – using extensions for estimation support and resistance levels and in combination with Fib retracement tool.

    Pipruit: Cool! So, in a simple approach (without your brain cracking advanced parts) we use Fib retracement for entering and Fib extensions for exiting, right?​

    Commander in Pips: In a simple approach – yes. Ok let’s start with that and use a 4-hour chart of EUR/USD. Suppose you see this picture – thrust up is developing currently, you see that looks like market takes a pause and possibly will show some retracement down. So you intend to join this thrust up and enter Long from one of retracement level. So, how do you intend to do that:

    Chart#1 EUR/USD 4-hour chart
    [​IMG]

    Pipruit: Well, we need to draw Fib retracement levels. Also I see the trend line, I think that I will use it in combination with Fib support level, just to get more confidence.​
     
    #1 Administrator, Jun 21, 2011
    Lasted edited by : Mar 6, 2016
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