FIBONACCI RETRACEMENT n FIBONACCI EXTENSION
FIBONACCI RETRACEMENT
- A Fib retracement tool is applied to identify a completion point of a retracement leg within an impulse.
- In a bullish trend, the price tends to set a higher high then retrace and set a higher low before going to the next high.
- In a bearish trend, the price tends to set a lower low and retrace to a lower high.
- With retracement levels, we are trying to spot the point from where the next impulse in a bullish or bearish trend will initiate based on the last impulse leg.
- Fib. levels that we will apply are:
✔️0.382✔️0.5✔️0.618✔️0.786
- The retracement levels will be drawn based on the XA impulse leg.
- From its low to high if the impulse is bullish and from its high to low if the impulse is bearish.
- From one of the above-mentioned levels, a trend-following movement will be expected.
- One should apply different techniques to confirm the strength of one of these levels.
FIBONACCI EXTENSION
- A Fib extension tool is applied to identify a completion point of the impulse.
- In a bearish trend, the extension levels will indicate a potential level of the next lower low based on the length of the last bearish impulse.
- Fib. levels that we will apply are:
✔️1.272✔️1.414✔️1.618
- The extension levels will be drawn based on the XA impulse leg.
- From its low to high if the impulse is bullish and from its high to low if the impulse is bearish.
- From one of the above-mentioned levels, a retracement leg will initiate.
- One should apply different techniques to confirm the strength of one of these levels.
- Of course other ways of applying Fib. Retracement and Extension levels exist. However, these two are the most common.
