Fibonacci expansion

Fibonacci expansion tool will help you pick your useful for picking profit targets when trading trends.

While plotting Fibonacci expansion, you have to take 2 price waves into account. 

  1. The first wave (AB) represents the price movement in line with the main trend. The distance between points A and B is seen as 100% and used in further calculations. 
  2. The second wave (BC) is a correction of the previous movement of the price. Its end in point C is the starting point from which the expansion levels are plotted in line with Fibonacci coefficients 0.618 or 61.8%, 1.618 or 161.8%. There are also optional expansions at the 2.618 and 4.236 levels.

Fibonacci expansion tool is used to find the location of the third wave (check Elliott wave theory).

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To put it simply, you will need 3 points on the chart to apply the tool. Look for the start of a new trend: formation of a higher low after a downtrend (the first low, the interim high and the lower low will be used to project the expansions to the upside) or lower high after an uptrend (the first high, the interim low and the lower high will be used to project the expansions to the downside). 

Choose the Fibonacci expansion tool in MetaTrader and connect the first 2 points with a line (points A and B on the chart below). Then select the instrument once again by clicking on the baseline you see on the chart and drag the third edge of the instrument to the third top or bottom (point C) without releasing the mouse. Adjust the line so that all 3 points are connected correctly (check that you placed the lines at candlesticks’ wicks).  

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How to trade using Fibonacci expansion

There are 2 logical places where you can enter the market:

  1. You can enter the trade on the basis of the Fibonacci retracement level (38.2%, 50%, or 61.8%) of the first wave, i.e. at point C.
  2. You can enter when the price moves beyond the end of the first wave, i.e. above point B. 

Point D is where you put you Take Profit level. It’s located at the 161.8% expansion. If the trend is strong, the price may move further to the upside, so the 261.8% expansion is also a potential target.

Frequently asked questions

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    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to withdraw the money you earned with FBS?

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