Fibonacci Expansion

If Fibonacci retracement tool it is mainly used in identifying better places to get into a trend, namely buying dips or selling spikes, the expansion tool helps traders identify possible targets, project future price movements, adapt Elliott Waves Theory relationships between different waves, basically setting up a path for what values to come next.

Elliott waves theory, just to give you an example, places a lot of emphasis on the Fibonacci expansion tool, as according to the theory, a classical five waves up sequence needs to have at least one extended wave, and that means 161.8% extension of the previous wave as a minimum target.

Another example on how to apply this tool comes in handy when you want to identify relationships between different movements price makes on market. For example, if you think that price is making a correction now, and looking for better levels to sell the market, than you might look at the previous move that started the correction and applying the expansion tool trying to find the place the correction ends.

In this recording I will show you how to set up the Expansion tool when you try to project a future price, how it is being used in Elliott waves theory, what are the important levels to watch (100%, 161.8%, 261.8%, 461.8%), why are they looked for traders, how to personalize the tool, and a few tips and tricks in using it. Will also look at different time frames in order to prove the point that it can be used on any time frame without any constraints.

Book recommendation: Constance Brown, “Fibonacci Analysis”, Bloomberg Market Essentials