Fibonacci extensions are used in Fibonacci retracement to tell spaces of support and resistance in the forex market. These Fibonacci extensions has to do with all the levels which are above the 100 percent levels. These extensions are basically used by forex traders in the determination of trade areas that will bring in returns and profits. Some extension levels like the 161.8% are used by forex traders to set price target on a breakout of an ascending triangle. This price target is calculated by multiplying the key Fibonacci ratio which is 61.8% by the vertical distance of the ascending triangle and followed by the addition of the triangles upper resistance level result. When Fibonacci extensions are combined with a variety of other indicators or pattern, they can be used by forex traders to locate one or multiple price targets.
A Fibonacci extension calculator is said to be a forex widget or tool that is used to create opportunities to maximize profit by getting a forex trader to know where to set a profit target in charts. A Fibonacci calculator has both the retracement and extension tools. The calculator generates level of retracement and extension for its user. The use of both the retracement and extension tool depends on a trader’s ability to trace the tools on the chart which is by identifying the high and low swings of prices.
PRACTICAL USE OF A FIBONACCI EXTENSIONS CALCULATOR
It is most practical and best to calculate Fibonacci Extensions when stocks are seen to be on new highs and lows and when they are no transparent support or resistance on the Fibonacci chart. For example, if a forex trader is seen to be long on a particular stock and its starts a new highs generation in the stock, the basic idea of where the stock is going to fall and make more profit can be determined if the forex trader can calculate the Fibonacci extension level. By so doing, the trader will have the option to decide if he wants to cover his position at that particular level.
In conclusion,Fibonacci Extensions can be applied to any form of timeframe be it monthly charts or one minute charts. Fibonacci extensions are tools which are more suitable for price waves therefore, projections of future stock price waves can easily be generated. But despite this fact, forex traders should be aware that clusters of Fibonacci levels are indicators of a price area that are always significant. Another very important fact that forex traders should take note of is that Fibonacci Extensions should never be the only determining factor when making position and trading choices.
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