How to Draw Fibonacci Extensions: Fibonacci Extension Levels, Targets, and Trading Strategy

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Written By Mind Math Money

Last Updated: March 16, 2025

Key Takeaways

  • Fibonacci extensions are primarily used to identify profit-taking target levels, not entry points

  • The most important Fibonacci extension levels to watch are 0.786 (78.6%), 1.0 (100%), and 1.618 (161.8%)

  • To draw correct Fibonacci extensions, identify the impulsive move (swing low to swing high) and the retracement (swing high to next swing low)

  • The 1.0 (100%) level indicates where the next move equals the previous one, making it a significant psychological price target

  • TradingView's Trend-Based FIB Extension tool provides the most accurate measurement for trading purposes

Today, we're diving deep into the world of Fibonacci extensions, a powerful tool for identifying price targets in your trading strategy. Whether you're into forex, day trading, or just curious about advanced technical analysis, this guide is for you. Let's get started!

For visual learners, watch this video on the Mind Math Money YouTube channel.

Understanding Fibonacci Extensions

When it comes to Fibonacci extensions, our primary focus is on identifying target levels. Remember, while Fibonacci retracements help us find entry points, Fibonacci extensions are all about pinpointing where to take profits.

Identifying Swing Highs and Lows

To use Fibonacci extensions effectively, you must first identify swing highs and swing lows. Let's look at an example chart:

  1. Swing Low: This is where the price bottoms out before a significant upward move.

  2. Swing High: This is the peak point where the price starts to pull back.

By recognizing these points, we can draw accurate extensions and predict potential price targets.

Fibonacci Swing High Swing Low

Key Fibonacci Levels

In our example, we see multiple price reversals at critical Fibonacci levels:

  • 0.786 Level: Look out for potential price reversals here.

  • 1.0 Level: This is a crucial level because it’s where the next swing move is equal to the previous one.

  • 1.618 Level: This number, derived from the Fibonacci sequence, is a common reversal point.

Fibonacci Extension Levels: 0.786, 1.0, and 1.618

Drawing Fibonacci Extensions Correctly

Here's how to draw Fibonacci extensions in TradingView:

  1. Open the Fibonacci Extension Tool: Head to the 'Gann and Fibonacci Tools' section.

  2. Choose Trend-Based FIB Extension: Select this tool for accurate measurement.

  3. Identify the Impulsive Move: Start from the swing low, drag to the swing high, and then down to the next swing low.

For precise extensions, you can use either the candlestick wicks or the real bodies of the candles.

Understanding Fibonacci Numbers

The numbers in Fibonacci extensions represent percentages. For instance:

  • 0.786: Indicates the price has moved 78.6% towards the measured move objective.

  • 1.0: Signifies the price has reached the full 100% measured move objective.

  • 1.618: Means the price has surpassed the objective by 61.8%, a common level for taking profits.

Practical Application in Trading

Fibonacci extensions are not just theoretical; they provide practical price targets for traders. When the price reaches the 1.0 level, many traders take profits. If the price extends to the 1.618 level, it's another popular profit-taking point. These levels help you manage trades and optimize your exit strategy.

Fibonacci Extensions FAQ

FAQ

What's the difference between Fibonacci retracements and extensions?

Fibonacci retracements are used to identify potential support and resistance levels during price pullbacks, helping you find entry points. Fibonacci extensions, on the other hand, project beyond the standard retracement levels to identify potential profit targets or price objectives after a retracement is complete. While retracements look backward at previous price moves, extensions look forward to future price targets.

Which Fibonacci extension levels are most important for traders?

The most critical Fibonacci extension levels are 0.786 (78.6%), 1.0 (100%), and 1.618 (161.8%). The 1.0 level represents when the current move equals the previous move in magnitude. The 1.618 level is derived from the golden ratio and is often a significant reversal point. Many traders use these levels as potential take-profit targets in trending markets.

How do you draw Fibonacci extensions on TradingView?

In TradingView, select the "Trend-Based FIB Extension" tool from the Gann and Fibonacci Tools section. To draw it correctly, click on the swing low (start of the impulsive move), drag to the swing high (peak), and then click on the next swing low (retracement). The tool will automatically display the extension levels beyond the retracement. You can customize which levels are displayed in the settings.

Can Fibonacci extensions be used for any timeframe or market?

Yes, Fibonacci extensions can be applied to any financial market (forex, stocks, cryptocurrencies, commodities) and any timeframe from 1-minute charts to monthly charts. They work best in trending markets with clear swing highs and lows. The principles remain the same across all markets, though some traders find that certain markets or timeframes show stronger reactions to these levels.

Should I use Fibonacci extensions alone or combine them with other indicators?

For best results, use Fibonacci extensions as part of a comprehensive trading strategy rather than in isolation. Combining them with other technical analysis tools like trend lines, moving averages, or momentum indicators can provide confirmation and increase the probability of successful trades. Look for confluence areas where multiple indicators suggest the same support/resistance level for the strongest signals.

QUIZ: Test Your Fibonacci Extension Knowledge

Test Your Knowledge

What is the primary purpose of Fibonacci extensions?

Which Fibonacci extension level represents when the current move equals the previous move in magnitude?

When drawing Fibonacci extensions, what three points do you need to identify?

Which of these is the golden ratio extension level that many traders watch?

In TradingView, which tool should you use for the most accurate Fibonacci extensions?

Conclusion

Mastering Fibonacci extensions can significantly enhance your trading strategy by providing precise price targets. Remember to practice identifying swing highs and lows, and use the Fibonacci extension tool to map out your trading plan. To learn more about trading swing highs and swing lows, check out this article next!

Read More on Mind Math Money

How To Use Fibonacci Retracement in TradingView: Draw Fibonacci Levels, Golden Zone, and Trading Strategy

Master the powerful Fibonacci retracement tool for identifying key support and resistance levels in any market.

Trading Swing Highs and Swing Lows: An Essential Guide for Traders

Learn how to identify and utilize swing highs and lows - the foundation for many trading strategies including Fibonacci tools.

Break of Structure (BoS) and Change of Character (CHoCH) Trading Strategy

Discover how to identify key market turning points that often align with Fibonacci extension targets.

Understanding Strong Highs, Weak Highs, Strong Lows, and Weak Lows

Learn how to classify price levels to find the highest probability trading opportunities using key market structure concepts.

About the Author: Mind Math Money

I bought my first stock at 16, and since then, financial markets have fascinated me. Understanding how human behavior shapes market structure and price action is both intellectually and financially rewarding.

I’ve always loved teaching—helping people have their “aha moments” is an amazing feeling. That’s why I created Mind Math Money to share insights on trading, technical analysis, and finance.

Over the years, I’ve built a community of over 200,000 YouTube followers, all striving to become better traders. Check out my YouTube channel for more insights and tutorials.

Mind Math Money
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