A Day Trader’s Tactical Tool: Fibonacci Extensions

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Fibonacci retracements pattern is a very knowledgeable tool to any trader. This trading tool is employed to spot reversals on charts. Day traders make use of this pattern as it is a well-known truth that stocks have a tendency to retrace their prior moves or display pullbacks which often appear in about three levels: 38.2%, 50% and 61.8%. But occasionally the stock retraces a 100% of its previous move and this is when a day trader utilizes Fibonacci extensions.

A day trader utilizes Fibonacci extensions to figure out when a trend could possibly cease. In day trading, this tool is very useful because it lets the day trader know when it's wise to exit a position and when to enter new ones. Fibonacci extensions and retracements show a day trader when a change in trend is about to come about and if he's still with or against it.

To compute Fibonacci extensions is fairly simple. A day trader just has to add 100% to the Fibonacci levels mentioned previously to obtain the Fibonacci extension levels. This can give him this particular standard Fibonacci extension levels: 138.2%, 150% and 161.8%. A day trader knows when to exit his position through vigilant watch whether one of these figures manifest. These Fibonacci extensions are usually plotted on a chart and is very hassle-free these days because of technology. Simple steps are to be followed when using a charting software in an uptrend: click on prominent swing low, point to the newest swing high and then to the latest swing low. For downtrends, a day trader has to do the opposite. The Fibonacci extensions will immediately emerge after these actions.

When it comes to day trading, Fibonacci extension levels are truly powerful tools. These may be used with candlesticks, trend lines and support-resistance lines. For more information on Fibonacci extensions, try going to a day trading blog. You can look into charts and other tools recommended by experienced day traders. You can also find day trading blogs that give in-depth details on Fibonacci extension with more complex formulas.

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A Day Trader’s Tactical Tool: Fibonacci Extensions

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A Day Trader’s Tactical Tool: Fibonacci Extensions

This article was published on 2012/03/10