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hey guys so in this video i'll be going
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in depth and showing you how to draw
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fibonacci for trading and i'll be
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covering fibonacci retracements
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fibonacci expansions and fibonacci
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extensions
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so if you enjoy this type of content and
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you'd like to see more of it
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be sure to subscribe to the channel and
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like this video so first let's start off
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with fibonacci retracements
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and a retracement is basically a
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pullback or a correction
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that's going against the main trend as
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price is trending
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in a single direction so in this case we
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have a bullish trend
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because prices forming higher highs
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followed by higher lows
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so a retracement would be the counter
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trend movement
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that's going against the direction of
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the trend
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and we know that when it comes to price
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action the market moves in waves
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so in this case we have an upwards wave
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which is much stronger and larger
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compared to the corrective wave
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or the retracement whatever you want to
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refer to it as
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and if price is ranging then the
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impulsive
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movements or the movements that are
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going in the direction of the trend
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will be much larger compared to its
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retracements
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so now let's go over how to use the
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fibonacci retracement tool so first
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things first
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before we get our fibonacci retracement
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tool we need to determine whether or not
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we have a bullish or a bearish
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impulsive move and there's a little bit
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of subjectivity to it
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but for the most part an impulsive move
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or impulsive wave
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is a quick and volatile movement that
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covers a lot of space
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in a short amount of time so in these
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two examples right here
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this would be our bullish impulsive move
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and then this would be our bearish
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impulsive move and these moves
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are the ones that we're going to be
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using our fibonacci retracement tool on
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in order to measure um the following
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move
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which is our retracement and compare it
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to the impulsive move
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so now that we have our bullish or
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bearish impulsive move
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we can get our fibonacci retracement
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tool and if it's a bullish impulsive
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move
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then we want to start with the low so
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that's where we would connect our first
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point
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and then we want to connect the second
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point to the high and then
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and then we want to move to the right
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and hopefully you have these levels on
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and if you don't have them on then you
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can always turn them on in the settings
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and you can decide whether or not you
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have fibonacci
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uh decimal points on or the percentages
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on
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now i personally like to have the
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percentages on so i just keep these on
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but now that we have this measured we
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can look to see
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that as price retraced in this example
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we passed the 23.6 fibonacci level
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but we didn't reach the 38.2 level so we
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can estimate and we can say that price
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retraced
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about 25 maybe 27 percent
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compared to this move right here so so
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if we were take
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to take this move measure it out and
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move it to the side
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and do the same to the fibonacci
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retracement move
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or the corrective move then if we
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compare it then we can see
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that this compared to this move right
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here
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looks to be about 25 which is the whole
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purpose
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of the fibonacc fibonacci retracement
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tool
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and why it only works on
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corrective movements or retracements
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and this is also why we don't want to
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start by
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connecting to the high first and then
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connect to the low for
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bullish impulsive moves because then
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these
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levels would be flipped upside down and
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obviously we didn't retrace
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70 percent of the way we only retraced
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about 25
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of the way and so something that
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a lot of traders will do uh with
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fibonaccis
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is if they are trading in the direction
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of a trend
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so in this case this is a bullish trend
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then they'll use their fibonacci
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uh retracement tools and this is usually
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combined with
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price action and other factors so you
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wouldn't use them alone
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but this is typically where they would
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they might place their entries
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depending of course on what type of
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trend it is
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so in this example right here let's say
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it's a strong trend
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and so a trader might have
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someone might might want to get a better
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entry
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so they would place their entry point at
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the
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23.6 level and then as price retraces
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and it touches this level
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it would continue upwards if this is
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obviously a bullish trend
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and they might even put their stop-loss
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behind one of these levels
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but again it depends uh what type of
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trend we're in
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so what i mean by this is that
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let me actually draw another example on
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the side over here
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let's say that we have two different
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types of bullish trends
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one bullish trend looks like this where
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the retracements are quite small
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and then we have a second bullish trend
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where the retracements are much deeper
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now obviously if the retracements are
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deeper
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then we're expected to reach the lower
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fibonacci levels
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so someone who's looking for an entry on
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on
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on a trend that's either slowing down or
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or a trend that's within a channel
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of some sorts then they may they might
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look to enter at the 61.8
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70.5 or 78.6 level
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versus someone who is trading within a
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strong trend
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um that has a lot of volatility and and
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strength
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or momentum in it then they might look
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at the 23.6 the 38.2
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or maybe even the 50 fibonacci
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retracement levels
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and so now that i got the bullish
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impulsive move out of the way
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we can move on to measuring the bearish
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impulsive move
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which basically works the same way
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except that instead of starting with the
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low
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we would start by connecting the first
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point to the high
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and then the second point to the low and
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then once again we want to
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move this to the right so that we have
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more room to see the numbers
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and so in this example we see that price
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actually reached
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and retraced to the 38.2 level
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before it continued downwards again so
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again in this example if we had a trader
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who
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did their analysis and let's say the
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38.2 lined up with
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a region of supply or whatever type of
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confluence
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or trading strategy they might have well
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then they would have their
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entry point right here their stop loss
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might be behind one of these levels or
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or higher depending on what their
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trading style is
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and they would enter at the 38.2
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fibonacci retracement level
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and that's what they where they would
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sell
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so it all depends on personal preference
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but this is typically
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how fibonacci uh retracement levels
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are used um which which helps a lot
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with uh having better entries if you're
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trading in the direction of a trend
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and you want to get in during one of the
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retracements so now let's get into
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fibonacci expansions and fibonacci
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extensions
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which are quite similar to each other
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except for one little difference which
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i'll
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get into in just a minute but going back
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to fibonacci retracements if you recall
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when it came to fibonacci retracements
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we used the fibonacci retracement tool
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to measure the bearish or bullish
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impulsive waves
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in order to see how much price were
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traced against
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the impulsive wave before we saw a
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continuation of price
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so a similar concept would apply to the
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fibonacci expansion and the fibonacci
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extension
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where once again we need to start off
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with either a bullish or a bearish
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impulsive wave but the difference here
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is that we're no longer concerned about
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how much
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price is retracing for the corrective
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wave
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what we're more concerned about is the
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following impulse of wave
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in order to see potential fibonacci
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levels that could be tested
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if price were to continue in the
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direction of the trend
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which is why you typically want to only
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use these if you believe that price
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is going to continue beyond the
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impulsive wave that you're using uh to
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measure these levels
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so now to measure these levels we want
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to take the fibonacci extension tool
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or the expansion tool if you have it
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available and if you don't have either
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of these
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of these available then you might need
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to use the fibonacci retracement tool
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and you
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might have to add these levels in your
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settings
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but starting off with the bullish
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impulsive wave
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similar to what we did for the fibonacci
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retracements
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we're going to want to start off with
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the low and then connect the second
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point to the high
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and then for fibonacci expansions we
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want to connect the third point
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back to the low and move this out to the
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right
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and i'm going to do the same thing for
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the
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the bearish impulsive wave except the
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difference is that it's flipped around
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so we want to start with the high and
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then connect
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to the low and then back to the high and
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stretch this out to the right and so
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what we can see here
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is that unlike the fibonacci retracement
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tool which gave us a bunch of fibonacci
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levels
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in the middle of this impulsive wave
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what we have over here is a bunch of
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fibonacci levels that go
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beyond the impulsive wave
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so going back to fibonacci expansions
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what a fibonacci expansion
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basically is is if we were to take
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a general measurement of this impulsive
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move
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and we were to project it out
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and we basically see a projection of
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where price
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is pushing towards if the trend
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continues
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so for example we reached the 127.2
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um expansion level so what this
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basically means
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is that price uh pushed 27.2 percent
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past the high of this impulsive move
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and the 113.1 level means that we pushed
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13.1 percent
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past the high of this impulsive move and
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the high would obviously be
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100 so what a lot of traders might
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use fibonacci expansions for or
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fibonacci extensions
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is um uh they might use these levels
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as price targets for where they want to
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take profits
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within their trades depending on which
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direction they're taking their trend
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their trade in so in this example if
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it's a bullish
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impulsive wave then we can assume that
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a trader is is longing the market
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and is in a buy trade so
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let's say that they got in over here at
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the retracement
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and they're looking to to see where they
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could take profit or partial profits
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well then they might look at the
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fibonacci expansion levels so in this
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case let's say they look
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at the 127.2 level
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and that's where they might mark their
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price target
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as where they want to take their profits
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and obviously you don't want to
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rely on these alone so you might combine
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this with like supply and demand
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zones or another factor um and you might
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not want to
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even put it right at the fibonacci level
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you might want to put it right below the
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level
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since a lot of a lot of other traders
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might be looking to take profit
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um at these fibonacci levels or they
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might
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be looking to take a trade in the
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opposite direction so
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just to be safe you might want to put it
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right below this price target
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but that's basically how fibonacci
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expansion levels work um and there's
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many more of them there's
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they they go up to the 200 percent the
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224
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um the 3.618 but
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typically those are more advanced
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fibonacci
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levels for for those traders that are
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looking to trade harmonics
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and harmonics i i can make i can make a
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video
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discussing harmonics and going over them
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but in this one i'll only focus on
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fibonacci expansions and extensions
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so now let's cover the fibonacci
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extension which i'll go over
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very quickly and honestly the main
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difference between
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the fibonacci extension and the
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fibonacci expansion tool
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is that the third point instead of being
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connected back
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to the higher low we're going to connect
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it to the bottom
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of the corrective wave so if you recall
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over here for our
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for our bearish um expansion
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we started with the high we connected to
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the low we moved back to the high
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but the difference here is that for the
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extension instead of moving back to the
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high
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we're going to move to the bottom of
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this corrective wave
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so it's similar but the difference is
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that we're connecting
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to the bottom of the corrective wave so
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obviously if we were to have
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a deeper corrective wave then this would
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connect a little bit
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lower if it's a bullish impulsive move
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and if the retracement isn't as deep
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then this would connect a bit higher
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and typically the most common fibonacci
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extension levels would be the 38.2
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the 61.8 and let's say the 161.8 but
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some traders might even use the 127.2
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but the same concept applies for this
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where a lot of traders might look to
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take profit at some of these
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fibonacci levels so whether or not you
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use a fibonacci expansion
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or the fibonacci extension tool is all
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personal preference
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just be sure to back test each of these
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and
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again like i said for the most part most
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traders use them
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as take profit targets or as potential
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regions that
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could possibly be tested if price were
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to
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continue within a trend into unknown
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territory
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um so that's everything i i hope i
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explained this uh
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quite well for you guys if there's
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anything that i was missing or something
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that you didn't understand
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then be sure to just drop a comment down
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below
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i hope you enjoyed this video thanks for
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watching
