How to Draw Fibonacci Expansion Indicator Tool on Stock Indices Charts

How Do I Use Fibonacci Expansion Levels on Indices Chart?

We use Fibonacci Expansion levels to estimate where the indices trend movement will reach. There are 2 important Fibonacci Expansion levels; 61.8% and 100% Fibonacci Expansion Levels, these are used for taking profit.

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 the original direction of the Indices trend. Where the stock indices price retracement reaches is used as chart point 3. Fibonacci Expansion Indicator is drawn using three chart points as shown on the stock indices trading example explained and illustrated below of how to draw the Fibonacci Expansion Indicator Tool.

The Fibonacci Expansion example explained and illustrated below shows the 3 Chart Points where the Fibonacci Expansion indicator is drawn, marked as Chart point 1, Chart point 2 and Chart point 3.

Chart point 1 is where the indices trend started, Chart point 2 is where the indices trend pulled back and retraced and Chart point 3 is where the stock indices retracement reached as shown on the Fibonacci Expansion Indicator Tool example explained and illustrated below.

How to Trade with Fibonacci Expansion? - How to Draw Fibonacci Expansion Levels on Indices Charts

Please note where these Fibonacci Expansion levels are drawn - Fibonacci Expansion levels are drawn above the Fibonacci indicator, these are the chart points where a indices trader will set the take profit orders using these Fibonacci Expansion Levels - 61.8% and 100.0% Fibonacci Expansion Levels.

Drawing Fibonacci Expansion Levels on an Upward Indices Trend

We use Fibonacci Expansion levels to estimate where the indices trend movement will reach. There are 2 important Fibonacci Expansion levels; 61.8% Fibonacci Expansion Level and 100% Fibonacci Expansion Level, these Fibonacci Expansion Levels are used for taking profit.

On the Fibonacci Expansion indicator example explained and illustrated below you can see that the Fibonacci Expansion indicator tool is drawn along the direction of the indices trend, since the indices trend is upwards - the Fibonacci Expansion indicator is drawn upwards.

These Fibonacci Expansion levels are displayed as horizontal lines above the Fibonacci Expansion indicator, showing profit taking areas. In the stock indices trading example explained and illustrated below if you had used of 100.0% Fibonacci Expansion level you would have made nice profit from the trade setup.

Drawing Fibonacci Expansion Indicator on an Upward Indices Trend - Fibonacci Expansion Trading Tool

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

Drawing Fibonacci Expansion Levels on a Downward Indices Trend

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

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

Try and spot the difference between how we have drawn Fibonacci Expansion indicator above and how Fibonacci Expansion 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 stock indices trading example explained and illustrated below. That would have been a good take profit area.

Drawing Fibonacci Expansion Indicator on a Downward Indices Trend - Fibonacci Expansion Trading Tool

From the Fibonacci Expansion indicator example above, after drawing this Fibonacci Expansion tool there are two levels that are used to show the profit taking areas, these two Fibonacci Expansion levels are drawn as horizontal lines across the stock indices price chart marked as 61.8% Fibonacci Expansion Level and 100% Fibonacci Expansion Level.