Don’t waste your time – keep track of how NFP affects the US dollar!

Thank you for visiting our website

The ASIC policy prohibits us from providing services to clients in your region. Are you already registered with FBS and want to continue working in your Personal area?

Personal area

Facebook like

Fibonacci Expansion

Information is not investment advice

Fibonacci expansion tool will help you pick useful targets when trend trading.

While plotting Fibonacci expansion, you have to take two price waves into account. 

  1. The first wave (AB) represents the price movement in line with the main trend. The distance between points A and B is seen as 100% and used in further calculations. 
  2. The second wave (BC) is a correction of the previous movement of the price. Its end in point C is the starting point from which the expansion levels are plotted in line with Fibonacci coefficients 0.618 or 61.8%, 1.618 or 161.8%. There are also optional expansions at the 2.618 and 4.236 levels.

Fibonacci expansion tool is used to find the third wave location (check Elliott wave theory).

23.png

To put it simply, you will need 3 points on the chart to apply the tool. Look for the start of a new trend: formation of a higher low after a downtrend (the first low, the interim high and the lower low will be used to project the expansions to the upside) or lower high after an uptrend (the first high, the interim low and the lower high will be used to project the expansions to the downside). 

Choose the Fibonacci expansion tool in MetaTrader and connect the first 2 points with a line (points A and B on the chart below). Then select the instrument once again by clicking on the baseline you see on the chart and drag the third edge of the instrument to the third top or bottom (point C) without releasing the mouse. Adjust the line so that all 3 points are connected correctly (check that you placed the lines at candlesticks’ wicks).

24.png

How to trade using Fibonacci expansion

There are 2 logical places where you can enter the market:

  1. You can enter the trade based on the Fibonacci retracement level (38.2%, 50%, or 61.8%) of the first wave, i.e. at point C.
  2. You can enter when the price moves beyond the end of the first wave, i.e. above point B. 

Point D is where you put your Take Profit level. It’s located at the 161.8% expansion. If the trend is strong, the price may move further to the upside, so the 261.8% expansion is also a potential target.

Latest news

AUD is All Excited about Job Data! Why?

Australia will release employment change and the unemployment rate on Thursday, at 02:30 MT time.

The USD Expects Boost from the Fed

The Federal Open Market Committee (the part of the Federal Reserve) will publish its Meeting Minutes on February 16, at 21:00 MT time.

What Awaits USD amid Skyrocketing Inflation?

The United States will publish the producer price index (PPI) on February 15, at 15:30 MT time.

Got questions? FBS Oceania Customer Support is ready to help!

Contact us via email at support@fbsaustralia.com