Hi There are 3 popular Fibonacci tools viz. Fib retracement, fib extension and fib projection. Most of the times traders get confused with these three and make wrong calculations. These levels can be calculated manually but most advanced trading platforms provide tools so that you don't have to go through the time consuming process of writing everything on the paper. In TradingView platform there are Fib retracement and Trend-based Fib extension tools, in the left pane of the chart window, for this purpose.
Fib retracements is the most popular among the three tools mentioned above. When a stock is in a strong uptrend and then it pulls back, this tool gives us potential reversal points where the pullback might end. These levels are 0.382, 0.5 and 0.618. We should look for some bullish pattern in this zone if we want to enter into a trade.
Fib extensions is a least known but still useful tool. It is used when the pullback is over and we have already taken an entry. It is calculated from the length of the pullback itself. It gives us targets which we should be looking for to exit the trade. Levels 1.272 and 1.618 are the popular ones among others.
Fib projection is also a popular tool to identify the targets to exit a trade. It is calculated form the length of the impulse as well as retracement.
I hope this information would help some traders in taking better trading decisions. Regards JJSINGH
Comment
⋅
Comment
⋅
Extension is calculated from the highlighted leg
Comment
⋅
Comment
⋅
How to draw/calculate extension of a down wave. First take fib retracement tool and untuck everything in the settings. Now tick 1.272, 1.618 and 2.618 or whatever extension u want. Take point B shown in the figure as point 1, now hold the tool from this point and drag it to point 2 that is C. U ll get the extensions.
For projections we need three points. Take the trend based fib extension tool and click on point A, take cursor to point B and click again, finally take it to point C and click. U ll get the projections. Remember that U first have to tick the projections that u want from the settings.
Could you please clarify the difference between extension and projection
Cheers.
Bravetotrade
⋅
@pranshusingh001, Yes, its clear that extensions are calculated from the length of retracement only. Projections are calculated from the AB(impulse)+C(pullback) with a different tool. I ll try to clarify with ex.
Prabub
⋅
@Bravetotrade, but for both Extension and projection we need all 3 point of A, B and C. both will show the future target. correct?
Bravetotrade
⋅
@Prabub, For extension only B and C points are needed. Yes, both give targets.
babuparmar1975
⋅
Sir
Better you post videos for better understanding to us. In handing please.
Hello ,
Good write-up but when i tried to apply i couldnt apply the extention and projection as if i select 'trend based fib extention' from the left pane tool-set , and extend from B to C i am given another line to put some-where , do i put that on C ? as you mentioned only B TO C is needed ...can you elaborate with steps :
1) select the Fib retracement tool from left pane ? or Fib extension tool ?
2) Now go to the Point A and then drag to Point B .....
Like this , i know its a bit of a dumb ask but not able to plot ...so if steps are provided i can attempt.
Thanks in Advance.
northguleria
⋅
Never mind ...read the write-up again n got it now :) !! Cheers
Cheers.