Fibonacci Extension Strategy using Fibonacci Extension Levels
Trading with Fibonacci Extension Indicator
Fib extension levels indicator is drawn using Three chart points.
To draw Fibo Extension zones we wait until the bitcoin price retracement is complete & the bitcoin price starts to move in the original direction of the Bitcoin trend. Where the retracement reaches is used as chart point 3.
The Fibonacci extension example illustrated below shows the 3 Chart Points where the Fibonacci extension indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the bitcoin trend started, Chart point 2 is where the bitcoin trend pulled back & retraced & Chart point 3 is where the cryptocurrency retracement reached as shown on the Fibonacci Extension Indicator example illustrated below.
Fibo Extension Strategy using Fibo Extension Levels
Please note where these Fibonacci Extension areas are plotted - Fibo Extension levels are plotted above the Fibonacci Indicator, these are points where the trader will place the takeprofit orders using these Fibo Extension Levels - 61.80% & 100% Fibo Extension Areas.
Drawing Fibo Extension Levels on an Upward Bitcoin Trend
We use Fibonacci extension levels to estimate where the bitcoin trend movement will reach. There are 2 important Fib extension levels: 61.8% & 100% Fibo Extension Levels, these are used for taking profit.
On the Fibonacci extension example illustrated below you can see that the Fibonacci extension technical indicator is plotted along the direction of the bitcoin trend, since the bitcoin trend is upward - the Fibonacci extension is also drawn upwards.
These Fibonacci extension levels are displayed as horizontal lines above the Fibo Extension technical indicator, showing profit taking areas. In the cryptocurrency trading example illustrated below if you had used of 100% Fibonacci extension you would have made nice profit from the trade set-up.
Drawing Fibo Extension Levels on an Upward Bitcoin Trend - Fibonacci Extension Strategies in Bitcoin Trading
From the above Fibonacci extension examples, the upward bitcoin trend continued & both 61.80% & 100.0% Fibonacci extension levels were all hit after which bitcoin price retraced again after hitting the 100.0 % Fibonacci Extension level.
Drawing Fib Extension Areas on a Downward Bitcoin Trend
Since we use this Fibonacci extension indicator to estimate take profit levels, how do we draw it in a downward trend?
We draw the Fibonacci extension indicator from chart point 1 to 2 to 3 as shown below. Remember we always plot this Fibonacci extension tool in direction of the cryptocurrency trend. In the Fibonacci extension example illustrated below, can you figure what direction we have drawn it? That is right - downwards direction.
Try & identify the difference between how we have drawn the Fibo extension above & how Fibonacci Extension is drawn below. This time you would also have used Fibonacci extension level 100%, just where the bitcoin price reached as illustrated on the cryptocurrency trading example illustrated below. That would have been a nice take profit area.
Fibonacci Extension Strategies in Crypto Trading
From the Fibonacci extension example above, after plotting this Fibonacci extension tool there are two levels that are used to show the profit taking areas, these two Fibonacci extension levels are drawn as horizontal lines across the bitcoin price chart.
