Might be very obvious however just need to check to make sure im looking at the correct tool.
I am going through the babypips school and at the point of learning about Fibonacci Extensions. In MT4 the closest tool i think is Fibonacci Expansion.
Can anyone confirm that Fibonacci Extensions is the exact same as Fibonacci Expansion?
The terminology is confusing, because [I]fibonacci extension[/I] and [I]fibonacci expansion[/I] sound similar.
But, actually they are [U]opposites[/U]. Let’s walk through it.
Suppose an upmove goes from a swing low (Point A) to a swing high (Point B), and then retraces (downward) to a price level (Point C) somewhere between A and B.
[B]Fibonacci retracement[/B]
In order to measure the retracement from B to C, you would use your fibonacci retracement tool to “pull a fib” [I]from A to B.[/I] When you do that, the tool will automatically divide the price range [I]from B to A[/I] into certain percentages (according to the fibonacci number-scale).
These percentages run from 0% to 100% [I]in the direction of the retracement[/I] (that is, from the price level of Point B, back to the price level of Point A). If there is no retracement from Point B, this is represented as 0%. And a complete retracement of the original upmove, back down to the level of Point A, is represented as 100%.
[B]Fibonacci extension[/B]
If your fibonacci retracement tool shows you projected price levels [I]below the price level of Point A,[/I] with corresponding percentages [I]greater than 100%,[/I] then the tool is showing you [I]fibonacci extension levels.[/I] That is, the tool is showing you various projected price levels based on a [I]continuation of the retracement beyond Point A.[/I]
So, in this example, an initial upmove is followed by a downward retracement; and the [I]fibonacci retracement[/I] and the [I]fibonacci extension[/I] are both projected in the [I]downward direction.[/I]
[B]Fibonacci expansion[/B]
A fibonacci expansion, on the other hand, shows specific price levels [I]starting from the end-point of the retracement (Point C), and projected in the same direction as the initial price move[/I] (upward in this example). That is, a fibonacci expansion tool shows you various projected price levels based on a [I]resumption of the initial price move.[/I]
So, continuing with our example, an initial upmove is followed by a downward retracement; and the [I]fibonacci expansion[/I] is projected in the [I]upward direction.[/I]
Here is a GOOD ARTICLE on the fibonacci expansion.
In any price swing (upmove or downmove) a [I]fibonacci retracement[/I] and its [I]fibonacci extension[/I] will both project in one direction — whereas a [I]fibonacci expansion[/I] will project in the opposite direction.