Fibonacci_2. Forex Fibonacci Extensions

Lesson 2: Forex Fibonacci Extensions

A Fibonacci Extension is a tool that helps you set profit targets. Similar to the
Fibonacci retracement, this tool also uses the Fibonacci sequence ratios.

The ratio between any number in the sequence and the previous number is
1.618. Let’s take a look at how to use these in your trading.

In an up-trend, you draw a Fibonacci extension from the most recent swing low
to the most recent swing high and then back to the latest retracement. This will show
you the two main levels at which you should set your price targets; 100% and
1.618% extension.

As you can see, the price hit the first target, retraced a bit, and also hit the
second target before reversing completely. Let’s do the same for the down-trend; so
draw the extension from the most recent swing high to the most recent swing low
and back to the retracement, which gives your targets here and here.