Wed. Jun 7th, 2023

Fxtriangle | Market analysis | Managed trading

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How to use Fibonacci Extensions to know when to take profit?

1 min read

We will be using Fibonacci to find targets. Let us discuss this with an uptrend. The idea in an uptrend is to grip the profits on a long trade at a Fibonacci Price Extension Level.

In order to make it work, you need to click the mouse thrice. First, click on the significant Swing Low, next drag the cursor and click on the current Swing High. Lastly, drag your cursor down again and next click on one of the retracement levels. After that, you will see the price extension levels displaying the ratio and parallel price levels.

To carry on with the subject, we will continue with the USD/CHF chart.

From the chart you can see that the price rose above the former Swing High. The 50.0% Fibonacci level bears strong as support. Followed by three tests, the pair reopens its uptrend.

Let us now use Fibonacci extension tool to justify the matter, that is, to make some good profit.

When the retracement swing low turns out:

  1. Price reformed to the 61.8% level aligning with the previous Swing High
  2. Next, it withdrew to the 38.2% level and found support
  3. Price again reformed and found resistance at 100% level
  4. After two days, the price again reformed before looking for resistance at 161.8% level

From the example, you can well assume that through these levels, that is, 61.8%, 100% and 161.8%, we can pull off some great profits.

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