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Chapter 10, Part VIII. Advanced view on Fibonacci Extensions. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 16, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Ok, I think this is enough for beginning. Now let’s take a look at different extensions that could be used in the same swings. Draw extensions for me here:

    Chart #3 GBP/USD Weekly

    Pipruit: Well, it’s not so difficult. I think it will be like that:​

    Chart #4 GBP/USD Weekly

    Commander in Pips: Well, that’s right. But why not like that:

    Chart #5 GBP/USD Weekly

    Commander in Pips: Here you can see, by the way, application of our 9th rule – AB and CD legs are harmonic. See, market has touched 1.0 Fib extension almost pips to pips on weekly time frame (!) and formed bearish engulfing pattern.

    Pipruit: Yes, that’s impressive.
    Commander in Pips: Or, may be we should marked them like here:

    Chart #6 GBP/USD Weekly

    Pipruit: Commander, I do not know, you confuse me. Which one is valid?​

    Commander in Pips: In fact, all of them are valid. He-he-he…

    Pipruit: That’s not funny. And which one we should trade, how to choose the most important?
    Commander in Pips: And those are reasonable questions, son. Let’s point some rules, how to deal with Fib extensions. They are not exhausted, but all that I will tell should be enough for beginning. When you get more experience – you will learn better and better to deal with them.

    1. You always have to start from higher time frame extensions (monthly quarterly), just to be sure that they are not going to have impact on your potential trade. Because it may happen that even trading on hourly chart, the market can reach some monthly extension target and you will see support or resistance there, where you absolutely do not expect to see it. It would cost you a lot of money and heartache. Actually this rule must be applied not only to extensions but to overall market analysis – always start from higher time frame, to understand where you are in a big picture;

    2. Try to recognize, where the thrust is (AB move) and where a retracement from these thrust is (BC move). Then you easily can estimate whole extension;

    3. “C” point should always stand inside AB swing. And, it always is the lowest/highest point, from which up/down extension move (CD) has started in continuation of initial AB swing;

    4. It is better, if the BC move is well recognizable and reaches at least 0.382 retracement level from AB swing. But sometimes could happen that the B point and C point will be the two nearest candles;
    #1 Sive Morten, Dec 16, 2013
    Lasted edited by : Mar 6, 2016
    Hamza Samiullah and fran alvarez like this.
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