When do we redraw a fib level on charts? Is it only when a trendline has been broken?
I modify fibs after the market has reach an extension and start retracing or after a new swing high/low. Also note that fibs varies for different time frames.
How are fibonacci extensions worked out, ie between what 2 points? I can how a retracement is the last low to current high or vice versa…but extensions?
So, you’re looking for a bounce of a fib level to continue with the current trend. When that trend is broken, we have to wait for a reversal area before we can draw another fib? If the trend doesn’t retrace to a fib level, is that when you are looking at targeting the extension levels?
A retracement is the percentage the market covers after a particular swing in the opposite direction. The extensions are the swings after the retracemnts. For example if the market retrace and bounce at a 61.8 from the last swing then the natural fib extension would be at the 161.8.
Say we are in an up trend and the market breaks below the up trend line, whenever it starts to retrace spread the fibs from the last high to the low and look for a pull back at a fib number. The extension is determined by the level of the retracement.
For example, in the attached EURJPY 1hr chart, the trendline A has been broken. Do we use the overall low at 1 and draw a line 1–>3 or do we take the new uptrend line and say that point 2 was the last swing low and draw 2–>3 as the fib?
You can do both. The most precise would be from 2-3. You can also spread it from 1-3 to find what we call fib convergence. This is where two fibs levels meets from two different swings with the same high or low.
But why? Because the trendline break says we might be on a mini uptrend therefore the last swing low of that uptrend was at 2?
If I do that then it looks like we have a bounce off the 50% so we should be targeting the extension at 138.2%?
If we go 1-3 then the price doesn’t quite touch the 38.2 before bouncing but close.
Yes the last swing was 2-3. Note that on the chart posted 3 is the extension after the retracement to 2.
If you get a bounce at the 38.2, 50 or 61.8 then the natural extension would be the 161.8. A bounce off a 78.6 extension would be the 127.
Do some use:
-if there is a bounce of the 38.2 then it’s a strong trend…so target the 161.8
-if there is a bounce off the 50 or 61.8 then the retrace is a bit stronger and trend weaker, therefore only target thet 138.2
?
Yea should. I only use the 38.2, 61.8 and 78.6 retracements along with the 127 and 161.8 extensions. But I’m sure the other levels work.
Another one the GBPJPY 1hr chart.
Now we have 2 areas with swing lows: 1–>2 and 3–4
3–4 gives a target of the brown line TP(3-4) whereas fib 1–2 gives a target much higher TP(1-2).
So, when we use this in conjunction with S&R do you take the conservative line or do you only use the most recent fib? We could have fib lines all over the place, which would kind of defeat the purpose 
I wouldn’t draw fibs at 3-4, the fibs should be drawn from the major highs/lows on a that time frame. Imo. On the chart you post the market has yet to reach the extension for the 1-2 swing, so the fib should remain. We are still within the 1-2 boundary.
Below is a copy of the chart you posted. You will see that the first wave is completed at the 161.8/4 after a 38.2/3 bounce then the market starts retrace. As soon as the market starts retracing you then spread the fibs from the last swing which is 3-4/a-b and look for a bounce at a fib level. Here the bounce was at a 78.6 so we now look for the market to go the 127 extension above b.
From 1–>2, I have the bounce at 50%?
You say as soon as the market starts retracing draw fibs from 3–>4 but do you mean retracing from 1–>2’s 161.8 target?
Correct. The 3-4/a-b is shown on the cart I post.
This the correct place to draw one on EURUSD?
I didn’t draw one from point A because it had already reached an extension point, same for point B so moved along to the next swing high/low C–>D
So, because this one retraced to 61.8% we might only target the 38.2extension?
The retracement for c-d is a 78.6 so the extension target should be the 127 which is already met.
Ah…ok missed that.
So where would there next fib go? Ideally, you’re looking for a retracement from the 127 level but that doesn’t seem forthcoming at the moment.
Would we draw another fib at the orange circles below?
So,
- retrace to 38.2 target 61.8 extension
- retrace to 50 or 61.8 gtarget 38.2 extension
- retrace to 78.6, target 27 extension.
Do most traders only use 38,50, and 61?
The next fib would be drawn from the new high down to the previous low where you have the 61.8 mark.
The orange circles are not the major highs, they are highs within the c-d boundary, so you only need the fibs from c-d.
Personally I’ve never seen a 38.2 extension. I use retracemnets 38.2, 61.8 and 78.6 with extensions 127 and 161.8.
I couldnt say what levels most traders use but the 38.2, 50, 61.8 and 78.6 are very common amongst traders I’m associated with.
Here (circled in pink)? Not much of a retrace from the top though…
Yea there but as you said not much of a retrace o that time frame so you wait until the market turns. As you know nothing in the market is sure so at times the market wont respect the extension levels as in this case.
Also what you can do is draw the fibs from a larger time frame than the one you trade from, then pick trades from smaller time frames and target the extension from the larger TF.