Fibonacci Extensions (also called Fibonacci Expansions) are a technical analysis tool used to project potential price targets beyond the end of a prior move — i.e., where the price might go after breaking the previous high/low in the direction of the trend.
They extend the Fibonacci ratios past 100% of the measured move, helping traders set profit targets, identify possible exhaustion zones, or anticipate where reversals might occur.
Key levels (most common):
• 100% — Equal to the length of the prior move (full projection).
• 127.2% / 161.8% (golden ratio extension) — Very popular profit targets.
• 200% — Double the move.
• 261.8% — Stronger extension (often major resistance/support).
Sometimes 138.2%, 423.6%, etc.
How to draw it (most platforms use 3 points):
• In an uptrend → Point 1: swing low (start of impulse), Point 2: swing high (end of impulse), Point 3: swing low of the pullback (retracement point).
• In a downtrend → Point 1: swing high, Point 2: swing low, Point 3: swing high of the pullback.
• The tool projects levels upward (uptrend) or downward (downtrend) from Point 3.
Common trading uses:
• After a pullback (retracement) in a strong trend, enter in the trend direction and target the 127.2%–161.8% extension levels.
• The 161.8% level is especially watched as a high-probability target where many take partial profits.
• Combine with retracements (previous topic): e.g., price pulls back to 50%–61.8% retracement → then extends to 161.8% of the full move.
Key tip: Like retracements, extensions are self-fulfilling due to widespread use — always confirm with candlestick patterns, volume spikes, trend strength, or other confluence (support/resistance, moving averages). They work best in trending markets, not choppy ones.
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