TECHNICAL ANALYSIS
FX
the pullback to determine the expected targets.
The calculation of the Fibonacci projection, projects the price action forward using the last prominent moves.
Chart.3 Fib fan
In case of an uptrend, we plot the Fib retracement on the exi sting uptrend, from swing low to swing high (left to r ight). We are thus looking for support at the Fibonacci level s and if the pul lback is held within the Fib retracement s , it is an indication that pr ice should resume the uptrend again.
Fibonacci Projections The
Fibonacci
The Fibonacci projection is calculated by taking two extreme points of the price pullback (in this case the swing high and swing low of the price) and adding the key Fibonacci ratios of 127.2%, 161.8%, 200.0% and 261.8%.
projections are
used to determine the expected price targets, once price has found support/resistance at the Fibonacci retracement levels.
Taking the previous example, if we are anticipating price to resume the uptrend, we use
Ideal situation: Estimating the price targets after the pullback is completed.
We project the price action forward, estimating that it will reach the fib levels.
Fibonacci Fans
The Fibonacci fans are a charting technique consisting of
diagonal Chart.4 Fib fans
lines that use Fibonacci ratios to help identify key levels of support and resistance. Fibonacci fans are created by first drawing a trend line through two points (usually the high and low), and then by dividing the vertical distance between the two points by the key Fibonacci ratios. Each result of these divisions represents a point within the vertical distance. The ‘fan’ lines are then created by drawing a line from the leftmost point to each of the three representing a Fibonacci ratio.
FX TRADER MAGAZINE April - June 2013 25
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