How to Draw Fibonacci Expansion Levels

How Do I Trade Indices and Draw Fibonacci Expansion Levels?

Traders use Fibonacci expansion levels to estimate where the trend movement will reach. There are two commonly used Fibonacci expansion levels - 61.8% Fibonacci Expansion Level and 100% Fibonacci Expansion Levels, these fibonacci expansion levels are used for setting indices take profit levels.

To draw Fibonacci Expansion levels on the stock indices chart 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 chart point 3. Fibonacci Expansion Indices Indicator is plotted using three chart points as illustrated on the Fib expansion stock indices example explained below of how to plot the Fib Expansion Technical Indicator Tool.

The Fibonacci expansion example explained and illustrated below shows the 3 Stock Indices Chart Points where the Fibonacci expansion stock indices indicator is drawn, marked as Stock Indices Chart point 1, Stock Indices Chart point 2 & Stock Indices Chart point 3.

Stock Indices Chart point 1 is where the indices trend started, Stock Indices Chart point 2 is where the indices trend pulled back & retraced and Stock Indices Chart point 3 is where the indices retracement reached as displayed on the Fib Expansion Indicator Tool example explained below.

How to Draw Fib Expansion Levels?

Please note where these Fib Expansion zones are plotted - Fibonacci Expansion zones are plotted above the Fib stock indices indicator, these are the stock chart points where a trader will place the indices take profit orders using these Fib Expansion Levels - 61.8% and 100.0% Fibonacci Expansion Levels.

Drawing Fibonacci Expansion Levels on an Upward Stock Indices Trend

We use Fibo expansion levels to estimate where the trend movement will reach. There are two commonly used Fibonacci expansion areas: 61.8% Indices Trading Fib Expansion Level & 100% Fibonacci Expansion Level, these Fibonacci Expansion Levels are used for taking profit.

On the Fibonacci expansion stock indices indicator example explained and illustrated below you can see that the Fibonacci expansion stock technical indicator is plotted along the direction of the trend, since the trend is upwards - the Fibonacci expansion levels stock indices indicator is drawn upwards.

These Fibo expansion levels are displayed as horizontal lines above Fibonacci Expansion Indicator, showing indices profit taking areas. In the stock indices trading example illustrated below if you had used the 100.00% Fib expansion level the you would have made good profit from the trade set-up.

Drawing Fibonacci Expansion Zones Technical Indicator on an Upward Indices Trend

From the above Fibonacci expansion stock indices indicator example, upward trend continued and both 61.8% & 100.0% Fibonacci expansion levels were all hit after which stock indices price retraced again after getting to the 100.00% Fibonacci Expansion level.

Drawing Fibonacci Expansion Areas on a Downwards Stock Indices Trend

Since we use the Fibonacci expansion stock indicator tool to estimate indices take profit levels, how do we draw Fibonacci Expansion in a downward Indices trend?

We draw the Fibonacci expansion stock indicator tool from chart point 1 to chart point 2 to chart point 3 as illustrated on the Fibonacci expansion stock indices trading example explained below. Remember we always draw this Fibonacci expansion tool in direction of the stock indices trend. In the Fibonacci expansion example explained and illustrated below, can you figure what's the direction which we have plotted it? That's right - downward direction.

Try & identify the difference between how we have drawn Fibonacci expansion levels stock indices indicator above and how Fibonacci Expansion levels stock indices indicator is drawn below. This time you would also have used Fibonacci expansion level 100.0%, just where the stock indices price reached as shown on the Fibonacci expansion levels stock indices trading example explained and illustrated below. This would have been a good indices take profit area.

Drawing Fibonacci Expansion Zones Technical Indicator on a Downward Indices Trend

From the Fibonacci expansion levels stock indices indicator example above, after plotting this Fibonacci expansion levels indices tool there are 2 levels which are used to show the indices profit taking areas - these two Fibonacci expansion levels are drawn as horizontal lines across the stock indices price chart marked as 61.80% Indices Trading Fib Expansion Level and 100% Fibonacci Expansion Level.

How to Draw Fib Expansion Areas