What's the diff. between Fibonacci Retracement and Extension?

Whats the difference using Fibonacci Retracement levels and Fibonacci Extension levels? Anyone mind clearifying. I read “3rd Grade: Fibonacci” but I’m still confused when to use Extension levels or Retracement levels.

Fib retracements are, for example, when price is going up from a low point and reaches a high point, then it moves back down again “retraces”.

Extension is when it goes up again , past the point where it previously went down, and makes a higher high.

Same idea when price moves from a high to a low, then moves up again. Whenever it back tracks, that’s a retracement. Whenever price exceeds it’s last high or low, thats an extension.

The fib levels are certain percentages of that price range made from a low to a high (or a high to a low), that it retraced, and then how much past that first move. Sorta like one step back, 2 steps forward…lol

Fibs are regarded as leading indicators and allow you to project where price might go.

[B]For how to trade retracements, I recommend this thread:[/B]
http://forums.babypips.com/show-me-money-swing-trading/8204-fib-retracement-trading.html

[B]For how to trade extentions, I recommend this thread:[/B]
http://forums.babypips.com/forextown/21934-30-pips-day-keeps-your-money-bay.html

Hope that helps :slight_smile:

1 Like

it did. thank you very much. appreciate your help.

Sweet Pip,

You have great resources. Thanks for sharing.

Dollie