Fibonacci Expansion

Brief

The section explains how to work with the Add Fibonacci Expansion tool.

Details

During a major trend, prices often retrace for a while before resuming to move in the direction of the major trend again. The Fibonacci Expansion can help determining how far the price might reach after such a retracement. On a chart, the Fibonacci Expansion tool is drawn as a broken line (Wave Line) with several (three by default) retracement lines running horizontally at certain spacing. The first part of the broken line (between Rate 1/Date 1 and Rate 2/Date 2) follows the major trend, while the second part (between Rate 2/Date 2 and Rate 3/Date 3) follows the market price retracement.
The Fibonacci Expansion tool can be used to define support and resistance levels after the market resumes moving in the direction of the major trend. The levels can help determining trade exiting points. It is often drawn together with the Fibonacci Retracement tool that allows a trader to see both possible trade entry and exit points.