Fibonacci Extentions For Profit Taking Targets In FX | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Fibonacci and targets 150 replies

What is the Differences between Fibonacci Fan and Fibonacci Arcs 15 replies

Profit From Profit-Taking —Scalping the Session Close 21 replies

PFT Projected Fibonacci Targets + calculator 2 replies

Friday Profit-Taking Action 1 reply

Fibonacci Extentions For Profit Taking Targets In FX

  • #1
  • First Post: May 21, 2006 8:47am May 21, 2006 8:47am
Is anyone here using Fibonacci Extentions for profit taking targets in FX ?

If yes, can you explain how you are using and which levels do you consider important.

I religeously use Fib retracements to help with my trading. Key retracement levels, 38.2 50.0 and 61.8 seem default, though when it comes to Fib Extentions, after much research, it seems that there are many different interpretations.

Most common extention levels used seem to be 1.382 (weaker trend) and 1.618 (stronger trend).

Anyway, interesting to here any thoughts.
  • #2
  • Edited 10:45am May 21, 2006 9:36am | Edited 10:45am
Greetings hagadol, My FIBO tool is set up with the following %:

.382 , .5 , .618 , .786 , .86 , 1.618 , 2.618 , -.18 , -.27 , -.618 , -1.618 , -2.618

Those in blue would be considered "Extensions", I.e. they are marking areas beyond the current swing "A" to "B" continuing the trend after bounce from/at "C" and looking for a new high/low at "D".

In a nut shell here is what i was taught and often see:

A to B to C with C @ .382 , .5 , .618 will often extend to a D @ -.618 , -1.618 , -2.618
A to B to C with C @ .786 , .86 will often extend to a D @ -.18 , -.27 , but rarely all the way to -.618

My 2 pips worth ; - )
Cheers,
Thom
  • #3
  • Edited 9:59am May 21, 2006 9:43am | Edited 9:59am
When you write:

A to B with B @ .382

Not sure what you mean B @.382 of what ?



My understanding is that if the initial move long is starting @ A and finishing @B (AB) price retraces to C (BC). When price gets back to B that is 100% retracement and anything above (new high) is an extention, so if it is a weak trend the price target might be 138.2 and in a strong trend 161.8.

I am trying to get better with my targets, from a technical standpoint.

I think what you mean is that if point C is a retrace of 38.2 then the expectancy is........Is that correct. A to B being the original up move and C being the retrace reversal point !

So are you trying to suggest that the possible extention target depends on the size of the retrace. And for a larger retrace that would been a lower value as the target ?

I have been reading up on Fib Extentions for the last 2 hours, various sites, books. So I am a touch fibbed out, so I apologize if I am going around in circles...........
  • #4
  • May 21, 2006 9:54am May 21, 2006 9:54am
If there is a retrace of more than 61.8, most would consider the trend over, so a long trade dangerous. So I am a little suprised that you would still look for an extention once this 61.8 retrace value has been breached. Perhaps I don't quite understand your example !
  • #5
  • May 21, 2006 10:11am May 21, 2006 10:11am
Quoting hagadol
When you write:

My understanding is that if the initial move long is starting @ A and finishing @B (AB) price retraces to C (BC). When price gets back to B that is 100% retracement and anything above (new high) is an extention, so if it is a weak trend the price target might be 138.2 and in a strong trend 161.8.

.
You are right there.

Low of A moves to a higher high (B) then will retrace to a fib level (C) and your Fib target would be (D) which would be a Fib target level.

As far as it breaking a lower fib level and the trend being over....it may not......you need to look to the longer timeframe and pull the fibs on it. It may be that it is just hitting fib levels on the longer term charts and not breaking them.......The longer charts usually overide the lower timeframes.
- SAFE TRADING MONEY DUCK
  • #6
  • May 21, 2006 10:30am May 21, 2006 10:30am
If you are taking about the same retrace, it is the same on any time frame, so why would you look to the higher one ? Fibs are not time frame dependant or are they ?

If the move up (AB) is 100 pips a 50% retrace is going to be minus 50 pips from the high (B) on all time frames.

I agree that generally looking at the higher time frames gives great clues.

So the question remains does the fib extention level you are aiming for depend on the size of the retrace BC ?

It seems that many using Fib Extentions make choosing which level dependant on how strong the trend is.


Quoting Money Duck
You are right there.

Low of A moves to a higher high (B) then will retrace to a fib level (C) and your Fib target would be (D) which would be a Fib target level.

As far as it breaking a lower fib level and the trend being over....it may not......you need to look to the longer timeframe and pull the fibs on it. It may be that it is just hitting fib levels on the longer term charts and not breaking them.......The longer charts usually overide the lower timeframes.
  • #7
  • May 21, 2006 10:48am May 21, 2006 10:48am
Hi Hagadol, i edited my post, Thanks for pointing that out! I meant to say A to B to C then onto the extension D.
Cheers,
Thom
  • #8
  • May 21, 2006 12:38pm May 21, 2006 12:38pm
Thanks for the edit. Makes sense to me now.

So in this example:

A to B to C with C @ .382 , .5 , .618 will often extend to a D @ -.618 , -1.618 , -2.618

How do you decide which you might aim for ? I assume you combine this analysis with other non fib factors to decide ?

It seems many decide the fib extention target by the trend strength. The stronger the trend the higher the number.
  • #9
  • May 21, 2006 4:59pm May 21, 2006 4:59pm
Quote
If there is a retrace of more than 61.8, most would consider the trend over, so a long trade dangerous. So I am a little suprised that you would still look for an extention once this 61.8 retrace value has been breached. Perhaps I don't quite understand your example !

This one I would have to disagree with from experience, the 78.6 is really a point of no return, not the 61.8, there have been plenty of trend resumptions with a breach of the 61.8 since I have been trading fibs, and Money Duck is right when saying longer term fibs can override short term ones, but he is of course referring a longer term fib drawn of a longer move.

I use extensions extensively in my trading method to set ultimate targets, especially the 161.8 extension for longer term targets, some use the 127.2 also, and if you travel to a 261.8, then the move could well of reached it's exhaustion point. Below is an example of todays GBP/USD 1H chart, with previous moves reaching these levels (only a few have been marked, there are many more on this chart):

http://img90.imageshack.us/img90/2547/chart20dp.gif

You can quit and they won't care, but you will always know.
  • #10
  • May 21, 2006 5:09pm May 21, 2006 5:09pm
Quoting Akuma99
This one I would have to disagree with from experience, the 78.6 is really a point of no return, not the 61.8, there have been plenty of trend resumptions with a breach of the 61.8 since I have been trading fibs, and Money Duck is right when saying longer term fibs can override short term ones, but he is of course referring a longer term fib drawn of a longer move.

I use extensions extensively in my trading method to set ultimate targets, especially the 161.8 extension for longer term targets, some use the 127.2 also, and if you travel to a 261.8, then the move could well of reached it's exhaustion point. Below is an example of todays GBP/USD 1H chart, with previous moves reaching these levels (only a few have been marked, there are many more on this chart):

http://img90.imageshack.us/img90/2547/chart20dp.gif


Thanks for the chart...Forgive my ignorance, but how do you determine the points to take the fib extensions from? I can see the logic in many of them, but it seems very subjective. is there a method?

Thanks,
Mike
  • #11
  • Last Post: May 21, 2006 5:42pm May 21, 2006 5:42pm
Well the truth of the matter is that it is subjective, I have just randomly chosen some swings in the chart above, there are plenty of other retracements you could have chosen that have reached at least their 127.2 extension level. They work best of course in trending markets, where you would be extending the retracements.
You can quit and they won't care, but you will always know.
0 traders viewing now