Every trader knows that economic data have a great impact on the Forex market.
In the last article, we’ve learned how to draw/use Fibonacci retracement. Today we will discover another effective technical tool – Fibonacci expansion. It may help you to identify exit levels, which will maximize your profit.
We often face with some temporary deviations in trends (we call them pullbacks or retracements). Once they are exhausted, prices usually return to the primary trend and sometimes even break highs/lows. At this very moment, you can use Fibo expansion to maximize your profit gains. All in all, our recommendation is to watch for a higher low or a lower high to apply this instrument. It’s clear that you will be lucky to catch the trend at the very beginning to get the biggest gains.
How to draw Fibonacci Expansion
To plot Fibo Expansion correctly, you should select three price points which indicate:
1. The beginning of the primary move, you first high;
2. The end of this move (the low of the move traced from the first high);
3. And the retracement (the swing high, next point measured from the primary move low).
Once you’ve plotted these points on the chart, three horizontal lines will appear corresponding to certain Fibo levels. Three horizontal lines identify your resistance/support levels which can be used for placing your profit targets. Voilà! That’s it, you’ve found your profitable setups, now you can earn lots of money.
Beware of the “Fibo expansion addiction” that may appear after you earn some money with this technical tool. Once you add Fibo expansions on a few of your charts, you will prone to add them all the time, because they are really profitable.
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