🧠 Article nine
Fibonacci – Part Two: Basic Technical Analysis Tools
(Fibonacci Retracement – Extension – Expansion)
After understanding the concept of the golden ratio and the important ratios associated with it in the previous article, let's move on to the practical tools we use daily in technical analysis.
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🔸 1. Fibonacci Retracement Tool
Used to identify correction points during the trend.
The tool is drawn from the bottom to the top (in an upward trend) or vice versa.
The most important ratios: 38.2% - 50% - 61.8%
Price often retraces from one of these ratios before completing the trend.
📌 Example: If the stock rises from 100 to 150, correcting to 130 is a 38.2% retracement.
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🔸 2. Fibonacci Extension
Used to determine profit targets after a breakout.
Drawn after identifying 3 points: the start of the movement, the end of the movement, and then the correction point.
Common ratios: 161.8% – 261.8% – 423.6%
📌 Ideal for forecasting after breaking resistance or support.
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🔸 3. Fibonacci Expansion
Similar to the extension but is often used with Elliott waves.
Shows advanced levels for price expansion.
Less common but useful in long-term analyses.
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✅ John Murphy's notes:
Fibonacci should not be relied upon alone. It is best used with chart patterns or momentum indicators.
The ratios are not magical levels, but areas of psychological interaction between buyers and sellers.
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📌 In the next article: How to integrate Fibonacci with trends, supports, and resistances in a practical and professional way.
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🔍 This information is not a recommendation, and the market always carries risks, think with your mind and make your own decision.
