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[Previous entry: "EUR and CAD Forex Fibonacci update."] [Main Index] [Next entry: "TRSI and stop-loss.."]
01/12/2007 Archived Entry: "Fibonacci expansions."
>Hello and a happy new year to you Neal.
>My question to you today is regarding price targets using fib-extensions.
>On any given up or down move it is likely that you will be able to spot
>more than 1 'ABC' move to price project. I have attached a monthly chart
>of the FTSE100 index to illustrate this and would like to point out that
>I use the 0.618,1.00,1.61 ratios only for price targets.
>
>Firstly would you agree with my labeling?
>If so is it feasible to take extensions from any or all of these points?
>(Obviously as long as we have not extended beyond the 1.61 level from any
>given 'ABC' move).
>
>Should any priority be given as to which price target to use?
>For example more priority for the most recent 'ABC' swing.
>
>Warm Regards
>Harry Click to see FTSE monthly chart. Hello Harry, You ask simple questions, but the answers can be very complicated. Yes your labeling is appropriate, those ABC swings all look good for Fibonacci expansions/extensions. One problem that traders have is that there are so many indicators, so many lines, so many possibilities. When you add more information to a chart, you reduce clarity and make trading much more difficult. The opportunity for errors and bad trades seems to increase as the complexity increases. All this while the trader is trying to find a good trade. With ABC (expansions/extensions) you should give priority to the larger and most obvious swings (stand out swings). Higher time-frames are also more important (those monthly expansions are stronger that than the 60-minute ones. Though if you're trading a 5 minute chart, the 60-minute expansions are very important too. So it's relative, you have to decide which swings are most important for your current trading time-frame. Also, and this is key, you want to find where there is SK support/resistance, confluence. To do that you have to combine retracements with your expansions. With some practice and experience it becomes easier, second-nature. -Neal.
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