Ok, so im reading in babypips school about fibonacci now. But i dont understand what is the diference between fibonacci retracement and extension. Im confused, 4 me it seems to be the same method but with different name?
Help me please kind people!
Fibonacci retracement gives you the possible turning points in the market,
whereas the fib extension gives you profit targets when in a trade.(Or possible
places of resistance)
Use it once you know where the price has turned ie 38%, 50% etc.
ie from the school
The examples illustrate that price finds at least some temporary support or resistance at the Fibonacci extension levels - not always, but often enough to correctly adjust your position to take profits and manage your risk
Read more: Fibonacci Extensions | Fibonacci | Learn Forex Trading
Fibonacci retracement is ratios/levels where price may stop retracing to resume the main trend. Fibonacci extension is where price has the potential to go.
Regards,
Clark
Hi, i am confused about fibonacci too. i cant find fibonacci extension in my meta trader, but there is a fibonacci expansion. May i reckon that there are the same thing?
fib retracements are the retracement levels within the area you drew it from. Take the chart below for example the 2 dotted white line are last weeks high and low. I drew my fib on that. The retracement level within that range are fib retracement levels. Now the levels outside that range are fib extentions. The difference is retracment predict where the maket will likely bounce within a area. Extentions predict where price will bonce after it breaks out of that area. Thus giving you an area of take profit or a place to watch for entries signals. Hope the chart comes in clearly I dont post charts to often.
Hi,
I am new and still learning. Just not sure how you place the fibonacci levels. So is the white line indicated in the graph the line you would draw for the retracement and the yellow line for the extension? Hope you are alright with me drawing the lines on your graph. Thanks
Bob ty very much now i completely understand the difference between them
If if you drew your fib from the high to the low of your white line you added to the chart. The yellow line would be a retracement. Now as you can see price went to about the 76.4 retracemnt level before turning back to the down side. After it broke the low if you notice on the chart price is stalling around the -23.6 fib extention level. To put it simple from 0-100% are fib retracement levels abo
Thanks a lot bob. That really clear things up. So once the price pushes down through the 0% level, would you then need to draw a new fibonacci? If so, you would need to wait for a new swing low to form?
Correct and fib extentions (-23.6 level) are where the swings are likely to happen. Glad to be of some help fibs are handy tool to use. As time goes on you will get better with them.