How to Draw Fib Expansion Technical Indicator Tool on Stock Indices Charts
How Do I Use Fibonacci Expansion Levels on Indices Chart?
We use Fibo Expansion levels to estimate where the trend movement will reach. There are 2 important Fibonacci Expansion areas: 61.8% & 100% Fibo Expansion Areas, 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 original direction of the Indices trend. Where the stock indices price retracement reaches is used as chart point 3. Fibonacci Expansion Technical Indicator is plotted using 3 chart points as displayed on the stock indices example explained below of how to plot the Fib Expansion Technical Indicator Tool.
The Fibonacci Expansion examples illustrated below shows the 3 Chart Points where the Fibonacci Expansion technical indicator is plotted, marked as Chart point 1, Chart point 2 & Chart point 3.
Chart point 1 is where the indices trend started, Chart point 2 is where the indices trend pulled back and retraced & Chart point 3 is where the stock indices retracement reached as shown on the Fib Expansion Indicator Tool example explained below.
How to Trade with Fibonacci Expansion? - How to Draw Fibonacci Expansion Levels on Indices Charts
Please note where these Fib Expansion zones are plotted - Fibonacci Expansion zones are drawn above the Fibonacci technical indicator, these are the chart points where a trader will set take profit orders using these Fibonacci Expansion Levels - 61.80% and 100.00% Fibonacci Expansion Areas.
Drawing Fibonacci Expansion Levels on an Upward Stock Indices Trend
We use Fibonacci Expansion levels to estimate where the trend movement will reach. There are 2 important 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 indicator example explained and illustrated below you can see that the Fibonacci Expansion technical indicator tool is plotted along the direction of the trend, since the trend is upward - the Fibonacci Expansion indicator is drawn upwards.
These Fibo Expansion areas are shown as horizontal lines above the Fib Expansion technical indicator, showing profit taking areas. In the stock indices examples illustrated below if you had used the 100.00% Fibo Expansion level you would have made a good profit from this setup.
Drawing Fibo Expansion Indicator on an Upward Indices Trend - Fibo Expansion Tool
From the above Fibonacci Expansion indicator example, upward trend continued and both 61.8% & 100.00% Fibonacci Expansion levels were all hit after which stock indices price retraced again after getting to the 100.00% Fibonacci Expansion level.
Drawing Fibo Expansion Areas on a Downwards Stock 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 from chart point 1 to chart point 2 to chart point 3 as shown on the stock indices example explained below. Remember we always plot this Fib Expansion tool in the direction of the trend. In the Fibonacci Expansion example explained below, can you determine what's the direction which we have plotted it? That's right - downward direction.
Try and identify 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 illustrated on the stock indices trading examples explained below. That would have been a good take profit area.
Drawing Fibo Expansion Indicator on a Downwards Indices Trend - Fibo Expansion Tool
From the Fibonacci Expansion indicator example above, after plotting this Fibonacci Expansion tool there are 2 levels that are used to show the profit taking areas, these two Fibo Expansion zones are plotted as horizontal lines across the stock indices price trading chart marked as 61.8% Indices Fibo Expansion Level and 100% Fibonacci Expansion Level.
