Fibonacci extension
In an uptrend, the common method is to use Fibonacci extensions to profit in long trades. You only need to click the mouse three times to determine the Fibonacci extension.
 
First, use the mouse to determine the effective low point of the band, then drag the cursor and click on the high point of the recent band. Finally, select a low point of the band again, click the mouse at any Fibonacci retracement position to draw the corresponding Fibonacci wave Nachi extension.
 
Let us review the example of USD/CHF in the previous lesson.

The 50.0% Fibonacci retracement level remained stable as a support. After testing the level three times, it finally chose to attack. In the above chart, you can even see the exchange rate break above the previous high of the band.
 
Now let’s take out the Fibonacci extension tool and see where is the best level of profit.

Now what happens after the USD/CHF retraces to the low of the band:
 
The price rebounded to the 61.8% level, which is close to the previous wave high
 
The exchange rate retreated to the 38.2% level and found support at that level
 
Then the exchange rate continued to rebound and encountered resistance at the 100% Fibonacci extension
 
As you can see, you can profit from the 61.8%, 100% and 161.8% extensions.
 
Now, let us look at an example of how to use Fibonacci extensions to profit in a downtrend.
 
In the downtrend, the common method is to use Fibonacci extensions to find short profit targets because the market will usually find support at these Fibonacci levels.
 
Let us look at an example of the EUR/USD hourly chart in the downtrend.

The euro/dollar closed the twilight star pattern at the 61.8% Fibonacci level. Subsequently, the exchange rate retreated due to the emergence of selling orders, and suppressed the exchange rate to retreat to the low point of the band.

The following is the exchange rate after the Fibonacci retracement reversal:
 
The price is supported at the level of 38.2%
 
The 50.0% level stabilized as an initial support and then turned into a profit area
 
The 61.8% level also turned into a profit area, and then the exchange rate went further lower and tested the band low.
 
You will also find that the 100% Fibonacci extension also plays a supporting role.
 
The above example shows that the price has at least a short-term support or resistance at the Fibonacci extension, but not always. Nevertheless, it is usually enough to adjust your position correctly for profit and manage your risks.
 
Of course, when using the Fibonacci extension tool, there are some issues that need to be addressed.
 
First, there is no way to know which Fibonacci extension level will provide support or resistance. Any price may or may not play a role of resistance or support.
 
Another problem is that you should decide from which low point to draw the corresponding Fibonacci extension.
 
One method is to find the low point of the band like the example we gave earlier, and the other method is to find the lowest low point of the band from the past 30 candles.
 
Once again, everyone is reminded that in practice, there is no one way to find specific support and resistance levels, but through a lot of practice, you will still find a good way to find the lows of the band.
 
When you use Fibonacci extension tools, you need to have good judgment. You need to judge how long the trend will extend. Later, we will teach you how to determine the strength of the trend.