fibonacci for trading

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