Drawing Fibonacci

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Introduction

"Fibonacci extension & Retracement tools."

What are Fibonacci Tools used for?

Fibonacci Retracement & Extension tools are used for measuring structure, projecting pullbacks, & projecting future price targets. Understanding its uses and how to correctly draw Fibonacci is crucial for calculating accurate technical analysis.

How to Draw Fibonacci

Fibonacci Extensions consists of 3 points. A beginning, middle, and end. Drawing Fibonacci Extensions measures the distance between the first 2 points from the 3rd point.

"Fibonacci Extensions of a Wave 1"

Key Extensions should include Fibonacci Sequence numbers 61.8%, 100%, 161.8%, 261.8%, 423.6% & 685.4% along with key ratios like 38.2%, 78.6% and 123.6%. It is best practice to code them for their various purposes.

Fibonacci Extension points should be set at pattern ending pivots. Meaning the extensions for most triangles & flats should be drawn at the end of pattern, even though price is at a higher low (bullish) or lower high (bearish) when the pattern ends (see "Extensions of a wave B triangle" image).

Fibonacci Retracements Measure the distance between two points. Key Fibonacci levels should include 0%, 14.6%, 23.6%, 38.2%, 50%, 61.8%, 78.6%, 85.4%, 100%, 123.6%, & 140%.

"Fibonacci Retracement of a Wave 1"
"Fibonacci Extensions of a wave 1 projecting wave 5"
"Fibonacci Extensions of waves 1+3 projecting wave 5"
"Fibonacci Extensions of a Zig Zag / Flat"
"Fibonacci Extensions of a Wave A from a Wave B Triangle"

*There are many ways to success and many strategies using different fib ratios. The Fibonacci extension and retracement levels mentioned above are the ones I use. I only keep visible the ones necessary for the characteristics of the pattern. For example, during wave 2 pullbacks I may only keep the 38.2, 50, and 61.8% levels visible.

Identifying the correct pivots will help you draw Fibonacci tools accurately. Measuring from the wrong pivot can cause an error in projection and result in lost profit. This is why it's imperative to double and triple check your work. Review your thesis and consider alternate possibilities. Confirm your thesis from multiple data points. Although it may be safe at times to scalp using Fibonacci alone, it is not advised and eventually will not work. Using Fibonacci tools along with EWT will identify the characteristics of the sequence cycle count thus exposing what fib levels should be expected (i.e. close a trade at 61.8% extension vs 161.8% because there is no EWT analysis or the EWT study has errors).

Section End
You have reached the end of the section. All sections are meant to work together. Several times of review may reveal a greater understanding of it or offer you inspiration for your own process.
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