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How To Calculate and Trade Fibonacci Extension Levels

Fibonacci extension levels extend beyond the 100% retracement level and are calculated by adding 100 or 200 to the standard Fibonacci ratios of 23.6%, 38.2%, etc. These extended levels often provide hidden support and resistance. To calculate, identify a bullish or bearish swing and draw the Fibonacci extension tool between the swing high and low points, with 0% at the end of the swing. Price reactions or breaks of extension levels like 123.6%, 138.2%, and 261.8% can provide trading opportunities.

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Prakhyati Raut
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413 views2 pages

How To Calculate and Trade Fibonacci Extension Levels

Fibonacci extension levels extend beyond the 100% retracement level and are calculated by adding 100 or 200 to the standard Fibonacci ratios of 23.6%, 38.2%, etc. These extended levels often provide hidden support and resistance. To calculate, identify a bullish or bearish swing and draw the Fibonacci extension tool between the swing high and low points, with 0% at the end of the swing. Price reactions or breaks of extension levels like 123.6%, 138.2%, and 261.8% can provide trading opportunities.

Uploaded by

Prakhyati Raut
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Summary Cheat Sheet: How to Calculate and Trade Fibonacci Extension Levels

• Most traders are already be familiar with the important Fibonacci levels - 23.6%, 38.2%, 50.0%, and
61.8%. These are considered internal retracements that are measured inside of a specific swing
being analyzed.

• There are important Fibonacci levels that extend beyond the 100% level and where price action
tends to react regularly. And these are what we call Fibonacci Extension levels.

• When we are measuring for external Fibonacci extensions, we are looking for impulsive price moves
after a corrective phase.

• Fibonacci extensions work similarly to Fibonacci retracements in that you would use them as
hidden support and resistance levels in the market. The psychological factor works the same way as
with the standard internal Fib levels.

• The important Fib extension levels are: 123.6%; 138.2%, 150.0%, 161.8%, and 261.8%.

• One simple way to remember these Fibo extension levels is by simply adding 100 to each of the
standard Fibonacci levels:

o 23.6 + 100 = 123.6


o 38.2 + 100 = 138.2
o 50.0 + 100 = 150.0
o 61.8 + 100 = 161.8
o And for the 261.8 level, by adding 200 to the most important Fibonacci level – the 61.8%
ratio: ( 61.8 + 200 = 261.8 )

• Typically, you would use Fib Retracements for moves within the trend and switch to Fib Extensions
when the price goes through the 100% Fibonacci level of the base trend; this means that the
reversal is of a larger magnitude than the measured base trend.

• Most trading platforms including MetaTrader 4 have the Fibonacci Extension tool built into their
indicator library. In the default version of the MT4 platform, the Fibonacci Extension tool is actually
the same indicator that you use for Fibonacci Retracements as well.

• The first thing you need to do when drawing a Fib extension is to find a trend or swing you want to
use as a base. You find and select two swing points, and simply stretch the Fibonacci Extensions
tool between the two edges of that swing.

• If the swing being measured is bullish, you need to stretch the tool starting from the lowest to the
highest point of the swing. If the swing being measured is bearish, then you stretch the indicator
from the top to the bottom of the down move. The idea is to have the 0.00% level at the end of the
swing that you take as a base.
• You can open trades when the price bounces off an extension level or when it breaks it.

• You can place your Stops at the next Fibonacci Extension level, but you should always be flexible
because a Fibo level could also be very far away. The same is true for take profit targets.

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