How to Draw Fib Extension Technical IndicatorTool on Downward Indices Trend
How Do I Draw Fib Extension for Indices Downtrend?
We draw the Fibo Extension indicator from chart point 1 to chart point 2 to chart point 3 as displayed on the stock indices trading example explained below. Remember we always draw this Fib Extension tool in direction of the trend. In the Fibo Extension examples explained below, can you figureout what's the direction which we have plotted it? That's right - downwards direction.
As a trader you'd also have used Fibo Extension area 100.0%, just where the stock indices trading price reached as displayed on the Fibo Extension example explained and illustrated below. That would have been a good take profit area.
How to Draw Fibo Extension on Down Indices Trend
From the Fibo Extension indicator tool example above, after drawing this Fibo Extension indicator tool there are two levels that are used to show the profit taking levels, these two Fib Extension levels are drawn as horizontal lines across the stock indices chart marked as 61.8 percent Stock Indices Trading Fibo Extension Level and 100% Fib Extension Level.
Explanation of How to Draw Fib Extension Levels on Indices Charts
We use Fib Extension Zones to estimate where the trend movement will reach. There are two commonly used Fibo Extension levels: 61.8% Fib Extension Level and 100% Fib Extension Levels, these are used for setting taking profit levels.
To draw Fib Extension levels on the stock indices chart we wait until the stock indices trading price retracement is complete & stock indices trading price starts to move in original direction of the Indices trend. Where the stock indices price retracement reaches is used as chart point 3. Fib Extension Indicator tool is drawn using three chart points as shown on the stock indices trading example explained below of how to plot the Fib Extension Technical IndicatorTool.
The Fib Extension examples described below shows the Three Chart Points where the Fib Extension indicator is plotted, 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 portrayed on the Fib Extension Indicator Tool example explained below.
How to Draw Fibo Extension Technical IndicatorTool on Downward Indices Trend
Please note where these Fibo Extension areas are drawn - Fib Extension zones are plotted above the Fibo indicator, these are chart points where one will set take-profit orders using these Fibo Expansion Levels - 61.8% Fib Extension Level and 100.0% Fibonacci Extension Level.