How Do I Analyze Fib Projection Zones on Stock Indices Charts?

How Do I Trade Fibonacci Projection Zones on Indices Charts?

Fibonacci projection indicator is drawn using 3 stock chart points.

To draw Fib Projection levels we wait until the stock indices price retracement is complete and the stock indices price starts to move in original direction of the stock indices trend. Where the stock indices price retracement reaches is used as stock chart point 3.

The Fibonacci projection stock indices trading example explained and illustrated below shows the 3 Indices Chart Points where the Fibonacci projection indicator is drawn, marked as Indices Chart point 1, 2 and 3. Indices Chart point 1 is where the indices trend started, Indices Chart point 2 is where the indices trend pulled back & retraced and Indices Chart point 3 is where the stock indices price retracement reached as illustrated on the Fib Projection Indices Trading Tool stock indices trading examples explained below.

How Do I Interpret Fibo Projection Zones on Indices Charts?

Please note where these Fib Projection areas are plotted - Fibonacci Projection zones are plotted above the Fibo Indices Indicator, these are the points where the trader will set the indices take profit orders using these Fibonacci Projection Levels - 61.8% and 100% Fibonacci Projection Areas.

Drawing Fib Projection Zones on an Upward Indices Trend

We use Fibonacci projection levels to estimate where the trend movement will reach. There are 2 important Fibonacci projection levels: 61.8% and 100% Fibonacci Projection Levels, these Fibonacci Projection Levels are used for setting indices take profit levels.

On the Fibonacci projection stock indices trading example explained and illustrated below you can see that the Fibonacci projection stock indices technical indicator is plotted along the direction of the trend, since the trend is upward - the Fibo projection is drawn upward.

These Fib projection levels are displayed as horizontal lines above the Fib Projection technical indicator, showing profit taking areas. In the stock indices trading example explained and illustrated below if you had used of 100% Fibonacci projection you would have made nice indices trading profit from the indices trade setup.

Drawing Fibo Projection Zones on an Upwards Indices Trend - Fibonacci Projection Strategies in Indices Trading

From the above Fibonacci projection indices trading examples, the upward trend continued and both 61.8% and 100.00% Fibonacci projection levels were all hit after which stock indices price retraced again after getting to the 100.00% Fibonacci Projection level.

Drawing Fib Projection Areas on a Downward Indices Trend

Since we use this Fibo projection tool to estimate indices take profit levels, how do we draw it in a downwards Indices trend?

We draw the Fibonacci projection indicator from stock chart point 1 to 2 to 3 as shown below. Remember we always draw this Fibonacci projection tool in direction of the stock indices trend. In the Fibonacci projection stock indices trading example explained and illustrated below, can you figure what direction we have drawn it? - downwards direction.

Try & identify the difference between how we have drawn Fibonacci projection above and how Fibonacci Projection is drawn below. This time you would also have used Fibonacci projection level 100%, just where the stock indices price reached as shown on the stock indices trading example explained and illustrated below. That would have been a nice indices take profit area.

Drawing Fibo Projection Areas on a Downwards Indices Trend - Fibonacci Projection Strategies in Indices Trading

From the Fibonacci projection stock indices trading example above, after plotting this Fibonacci projection indices tool there are 2 levels which are used to show the indices profit taking areas, these two Fibonacci projection indices levels are drawn as horizontal lines across the stock indices chart.

How Do I Interpret Fibo Projection Zones on Indices Charts