How to Draw Fibonacci Projection Technical Indicator Tool on Stock Indices Charts
How Do I Use Fibonacci Projection Zones on Indices Chart?
We use Fibo Projection levels to estimate where the trend movement will reach. There are 2 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 Trading Indicator is plotted using 3 chart points as shown on stock indices example explained below of how to plot the Fib Projection Indicator Tool.
The Fib Projection examples described below shows the Three Chart Points where the Fib Projection indicator is drawn, 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 displayed on the Fibo Projection Technical Indicator Tool example explained below.
How to Trade with Fibonacci Projection? - How to Draw Fibonacci Projection Zones on Indices Charts
Please note where these Fibonacci 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 Fibonacci Projection Zones on an Upwards Stock Indices Trend
We use Fibo Projection levels to estimate where the trend movement will reach. There are 2 important Fibonacci Projection levels: 61.8%Fibonacci Projection Level and 100% Fibonacci Projection Level, these Fibonacci Projection Levels are used for taking profit.
On the Fibonacci Projection technical indicator example explained and illustrated below you can see that the Fibonacci Projection technical indicator is plotted along the direction of the trend, since the trend is upwards - the Fibonacci Projection technical indicator is drawn upwards.
These Fibonacci 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% Fibonacci Projection level the you would have made good profit from this setup.
Drawing Fibonacci Projection Indicator on an Upwards Indices Trend - Fib Projection Tool
From the above Fibonacci Projection technical indicator example, upward trend continued and both 61.8% & 100.0% Fibonacci Projection levels were all hit after which stock indices trading price retraced again after getting to the 100.00% Fibonacci Projection level.
Drawing Fibonacci Projection Areas on a Downwards Stock Indices Trend
Since we use the Fib Projection technical indicator to estimate take profit levels, how do we draw Fibonacci 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 Fibonacci Projection technical indicator above and how Fibonacci Projection technical indicator is drawn below. This time you would also have used Fibonacci Projection level 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 Fibonacci Projection Indicator on a Downwards Indices Trend - Fib Projection Tool
From the Fibonacci Projection technical indicator example above, after plotting this Fibonacci Projection tool there are 2 levels that are used to show the profit taking areas, these two Fibonacci Projection areas are plotted as horizontal lines across the stock indices trading price chart marked as 61.8%Fibonacci Projection Level and 100% Fibonacci Projection Level.
