Last week we covered the Fibonacci percentages starting from We then defined a retracement and looked at how the size of a retracement can coincide with a Fibonacci level on a chart. To recap, the list of Fibonacci levels we covered were: When measuring an extension in relation to Fib levels, we measure it in proportion to the first move.
In other words, we look at the size of the extension and see what that size is as a percentage of the first move up to Point 1 on the chart above. This is not as straightforward as measuring the retracement, but with a little bit of practice it should be easily understood. For the sake of clarity, I have removed all other Fibonacci levels and just left one level displayed to prevent the chart from being too cluttered. What that means is that the size of the first move is equal to the size of the extension.
In practice, the size of the move up to Point 1 was pips, and the distance the price moved from Point 2 to the end of the extension was pips, i. Here, the price moves down to Point 1, retraces to Point 2, and then hits the As with retracements, multiple extensions can be combined on a chart and this will be explored later in the series. An extension can be measured as a Fibonacci proportion of the first move, or Wave 1 3.
Multiple extension levels can be combined on a single chart Note: Click and drag the mouse on the screen to your desired points. Learn more from this series: The Natural Connection Fibonacci and Forex: Huzefa Hamid is the co-founder of TheForexRoom. Registration is required to ensure the security of our users. Login via Facebook to share your comment with your friends, or register for DailyForex to post comments quickly and safely whenever you have something to say.
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