TECHNICAL ANALYSIS
FX
offers a distinct advantage over the other usual Fibonacci ratios since it does not plot levels “behind” the market, but in “front” of the market. In other words, if the market is moving up and making new highs, the standard fib retracements will draw levels BELOW the current price, but the fib expansions will draw levels ABOVE the current price.
Chart.5 Fib Expansion image
Fibonacci Fans give strong indications of direction and act as effective filters for a trend. It is considered that these lines will serve as future levels of support/resistance for a developing pullback or a new trend.
Ideal situation: To validate a 1-2-3 pattern.
Te next article will cover the 1-2-
3 pattern and how we can use the Fibonacci
fans to determine if the
pattern is valid. But in brief, if the pullback of the 1-2-3 pattern is within the required fan levels, then we can consider it to be a valid pattern.
Fibonacci Expansions
The Fibonacci expansion is a great tool for establishing profit targets. It
To draw Fibonacci Expansion targets, we require three swing points.
We measure the distance from Point A to Point B. However, we can’t project price targets until Point C has been established.
Only when Point C has been formed, we have the necessary three swing points and we can plot the Fibonacci Expansion Tool on Point A, Point B, and Point C.
Ideal situation: Estimating the price objectives of a 1-2-3 pattern.
Once again, the next article will cover this in further detail.
I hope this article has cleared the common misconception of the Fibonacci ratios and has established the basics. The next article will take the Fibonacci ratios to the next level by precisely defining the ideal situations to use them.
Chart.6 Fib Expansions Sunil Mangwani FX TRADER MAGAZINE April - June 2013 27
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94