How to Draw Fib Projection Technical IndicatorTool on Stock Indices Charts

How Do I Use Fibo Projection Zones on Indices Chart?

We use Fibo Projection levels to estimate where the trend movement will reach. There are two important Fibo Projection levels: 61.8% and 100% Fibo Projection Areas, these are used for taking profit.

To draw Fibo Projection levels on 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 trading price retracement reaches is used as chart point 3. Fibo Projection Indicator is plotted using 3 chart points as shown on stock indices example explained below of how to plot the Fib Projection IndicatorTool.

The Fib Projection examples described below shows the Three Chart Points where the Fib Projection 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 Fibo Projection Indicator Tool example explained below.

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Please note where these Fibo Projection areas are drawn - Fibo Projection areas are plotted above Fibo indicator, these are chart points where one will set take-profit orders using these Fibo Projection Levels - 61.8% and 100.0% Fibo Projection Zones.

Drawing Fib Projection Zones on an Upwards Stock Indices Trend

We use Fibo Projection levels to estimate where the trend movement will reach. There are two important Fib Projection levels: 61.8%Fib Projection Level and 100% Fib Projection Level, these Fibo Projection Levels are used for taking profit.

On the Fibo Projection indicator example explained and illustrated below you can see that the Fibo Projection indicator is plotted along the direction of the trend, since the trend is up-wards - the Fibo Projection indicator is drawn upwards.

These Fibo Projection zones are displayed as horizontal lines above Fibo Projection indicator, showing profit taking areas. In the stock indices trading example explained below if you had used the 100.00% Fib Projection area the you would have made good profit from this setup.

Drawing Fib Projection Indicator on an Upwards Indices Trend - Fib Projection Tool

From the above Fibo Projection indicator example, upward trend continued and both 61.8% & 100.0% Fib Projection levels were all hit after which stock indices trading price retraced again after getting to the 100.00% Fib Projection level.

Drawing Fib Projection Areas on a Downwards Stock Indices Trend

Since we use the Fib Projection indicator to estimate take profit levels, how do we draw Fib Projection in a downwards Indices trend?

We draw the Fibo Projection tool from chart point 1 to chart point 2 to chart point 3 as shown on stock indices trading example explained below. Remember we always draw this Fibo Projection tool in direction of the trend. In the Fib Projection examples explained below, can you figureout what's the direction which we have plotted it? That's right - downwards direction.

Try & identify the difference between how we have drawn Fib Projection indicator above and how Fib Projection indicator is drawn below. This time you'd also have used Fibo Projection area 100.0%, just where the stock indices trading price reached as displayed on the stock indices trading examples explained below. That would have been a good take profit area.

Drawing Fib Projection Indicator on a Downwards Indices Trend - Fib Projection Tool

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