How to Draw Fibonacci Expansion Indicator on stock index Charts

We use Fib extension areas to try to project where trend move will get to. There are 2 important Fib expansion areas: 61.8% and 100% Fib Expansion Levels, these are used for profit booking.

To draw Fibonacci Expansion levels on the stock chart we wait til the stock trading price retracement is complete & trading price begins heading in original direction of the trend. Where the stocks price pull back gets to is used as point 3. Fibo Expansion Indicator is drawn/plotted using three chart points just as is displayed on the stock illustration explained below of how to draw the Fibo Expansion Technical IndicatorTool.

The Fib expansion examples described below shows the Three Chart Points where the Fib expansion indicator is drawn, marked as Chart point 1, Chart point 2 & Chart point 3.

Chart point 1 is where trend started, Chart point 2 is where trend pulled back and retraced & Chart point 3 is where the stock retracement got to as illustrated on the Fibonacci Extension Indicator Tool example illustration explained below.

Fib Expansion Strategy using Fibonacci Expansion Levels

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

Please note where these Fibonacci Extension levels are drawn - Fibonacci Expansion levels are plotted above the Fib indicator, these are the chart levels where a trader will place takeprofit orders using these Fibo Expansion Levels - 61.8% and 100.00% Fibo Extension Levels.

Drawing Fib Expansion Levels on an Upwards Trend

We use Fib expansion areas to try to project where trend move will get to. There are 2 important Fibonacci expansion areas: 61.8% Fib Expansion Level and 100 % Fibo Expansion Level, these Fib Expansion Levels are used for taking profit.

On the Fib expansion indicator example explained & illustrated and shown below you as a trader can see that the Fib expansion technical indicator is plotted & drawn along the direction of the trend, since the trend is upwards - the Fibonacci expansion indicator is drawn upwards.

These Fib extension levels are shown as horizontal lines above Fib Expansion indicator, showing profit booking zones. In the stock 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 Fib Expansion Indicator on an Upward Trend - How Do I Draw Fib Expansion?

Drawing Fib Expansion Indicator on an Upward Trend - Fibo Expansion Tool

From the above Fib extension technical indicator example, upward trend continued & both 61.8 % & 100.0 % Fib expansion levels were all hit after which the price retraced again after getting to the 100.00 % Fibo Expansion level.

Drawing Fib Expansion Areas on a Downward Trend

Since we use the Fib extension technical indicator tool to gauge/estimate tp order zones, how do we draw Fibonacci Expansion in a downward trend?

We draw the Fib expansion indicator from chart point 1 to chart point 2 to chart point 3 like as illustrated and shown on the stock example illustration explained below. Remember we always draw this Fib extension tool in direction of the market price trend. In the Fib extension example explained & illustrated below, can you figure out what is the direction which we've plotted it? That's right - downward direction.

Try and identify the difference between how we've drawn Fibonacci expansion indicator above and how Fibonacci Expansion tool is plotted below. This time you'd also have used Fib extension area 100.00%, just where the stock trading price reached just as is displayed on the stock trading illustrations expounded below. That would have been a nice take-profit zone.

Fibo Expansion Strategies in Stock Indices Trade

Drawing Fib Indicator on a Downward Trend - Fibo Expansion Tool

From the Fib extension technical indicator example set-out above, after drawing this Fib extension indicator there are 2 levels which are used to illustrate the profit booking zones, these 2 Fib extension levels are plotted as horizontal lines across the stock price chart labeled and marked as 61.8 percent Fibo Expansion Level & 100 % Fibo Extension Level.

Study More Tutorials & Courses:

Trade Stock Indices

How to Draw Fibonacci Expansion Indicator on stock index Charts

Drawing Fib Expansion Levels on an Upwards Trend

Drawing Fib Expansion Areas on a Downward Trend