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

What will move the markets on September 20-24

Quadruple witching is gone and now there are no reasons for the market to hinder. From banks statements and economic data to gas storage reading and Fed’s Powell speech – get ready for active trading.

Strong US Retail Sales Pressed Gold

The US showed strong retail sales for August despite the spread of the Delta virus strain. As a result, the US dollar rocketed and gold dropped by 2286 points in half an hour after the release.

Apple event surprised traders

Every year in early autumn Apple holds its event where it presents new iPhones, Apple Watches, and iPads. This year wasn’t an exclusion. But yesterday’s presentation didn’t result in Apple stock growth, and here’s why.

Be on top of your game

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

Contact us via email at support@fbsaustralia.com

or

Start Live Chat