What's Difference between Stock Indices Fibo Retracement and Stock Index Fibonacci Extension?

How to use Fibo Retracement and Extension and the Difference between Fibo Retracement and Extension

Stock Indices Trading Fibo Retracement Areas

Fibonacci retracement is plotted between 2 chart points but Fib extension is plotted using 3 chart points.

Fib Retracement Level example explained and illustrated below where the indices trend is moving down between Chart point 1 & Chart point 2, then after Chart point 2 the stock indices price retraces then it continues moving upward in original upward trend. Note that this Fibo Retracement Levels indicator is plotted from Chart point 1 to Chart point 2 in direction of the market trend.

Fib Retracement Levels - How to Draw Fibo Retracement Levels

Fib Extension Levels

Fibo retracement is plotted between 2 chart points but Fib extension is plotted using 3 chart points.

To draw these Fibo Extension levels we wait until the stock indices price retracement is complete & the stock indices price starts to move in original direction of the Indices trend. Where the retracement reaches is used as chart point 3 for Fibo extension.

The Fibo Extension example explained below shows the 3 chart Points where the Fibo Extension indicator tool is plotted, marked as chart point 1, 2 & 3. Chart point 1 is where the indices trend started, Chart point 2 is where the indices trend pulled back & retraced & Chart point 3 is where the retracement reached as shown on Fib Extension example described & illustrated below.

Fib Extension Levels - How to Draw Fibo Extension Zones

Please note where these Fibo Extension areas are plotted - Fibo Extension zones are drawn above the Fibo Extension indicator, these are the points where one will set the take-profit orders.