How to Draw Fibonacci Extension
How Do I Use Fibonacci Extension Levels on Bitcoin Chart?
We use Fibo Extension Levels to estimate where the bitcoin trend movement will reach. There are Two important Fibo Extension areas: 61.80% & 100% Fibo Extension Areas, these are used for taking profit.
To draw Fibo Extension levels on the cryptocurrency chart we wait until the bitcoin price retracement is complete and the bitcoin price starts to move in the original direction of the Bitcoin trend. Where the bitcoin trading price retracement reaches is used as chart point 3. Fibo Extension Technical Indicator is plotted using 3 chart points as illustrated on the cryptocurrency trading example illustrated below of how to draw the Fibo Extension Technical Indicator Tool.
The Fibonacci Extension example illustrated below shows the 3 Chart Points where the Fibo Extension technical indicator is plotted, marked as Chart point 1, Chart point 2 & Chart point 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 Technical Indicator Tool example illustrated below.
How to Trade with Fibonacci Extension? - How to Draw Fibonacci Extension Levels on Bitcoin Charts
Please note where these Fibo Extension areas are plotted - Fibo Extension levels are drawn above the Fibo indicator, these are the chart points where a trader will set the takeprofit orders using these Fibonacci Extension Levels - 61.80% & 100.00% Fibo Extension Areas.
Drawing Fibo Extension Levels on an Upwards Bitcoin Trend
We use Fibo Extension Levels to estimate where the bitcoin trend movement will reach. There are Two important Fibo Extension areas: 61.80% BTCUSD Trading Fib Extension Level & 100% Fibonacci Extension Level, these Fibonacci Extension Areas are used for taking profit.
On the Fibonacci Extension indicator example illustrated below you can see that the Fibonacci Extension technical indicator tool is plotted along the direction of the bitcoin trend, since the bitcoin trend is upward - the Fibo Extension technical indicator is plotted upward.
These Fibonacci Extension levels are shown as horizontal lines above the Fibonacci Extension technical indicator, showing the profit taking areas. In the cryptocurrency trading example illustrated below if you had used of 100.0% Fibo Extension level you would have made good profit from using this trading setup.
Drawing Fibonacci Extension Indicator on an Upward Bitcoin Trend - Fibonacci Extension Tool
From the above Fibonacci Extension indicator example, the upward bitcoin trend continued & both 61.80% & 100.0% Fibo Extension levels were all hit after which bitcoin price retraced again after getting to the 100.0% Fibo Extension level.
Drawing Fibonacci Extension Areas on a Downward Bitcoin Trend
Since we use the Fibonacci Extension indicator tool to estimate take profit levels, how do we draw Fibonacci Extension in a downward Crypto trend?
We draw the Fibo Extension indicator tool from chart point 1 to chart point 2 to chart point 3 as shown on the cryptocurrency trading example illustrated below. Remember we always draw this Fibonacci Extension tool in direction of the cryptocurrency trend. In the Fibonacci Extension example illustrated below, can you figure what is the direction which we have drawn it? That's right - downwards direction.
Try & identify the difference between how we have plotted Fibo Extension technical indicator above and how Fibo Extension technical indicator is plotted below. This time you would also have used Fibonacci Extension level 100.0%, just where the bitcoin price reached as shown on the cryptocurrency trading example illustrated below. That would have been a good take profit area.
Drawing Fibonacci Extension Indicator on a Downward Bitcoin Trend - Fibonacci Extension Tool
From the Fibonacci Extension indicator example above, after plotting this Fibo Extension tool there are two levels that are used to show the profit taking areas, these two Fibo Extension areas are plotted as horizontal lines across the bitcoin trading price chart marked as 61.80% BTCUSD Fibo Extension Level & 100% Fibo Extension Level.
