Strategy Essential

How To Use The Fibonacci Expansion

Tool To Identify Likely Reversal Areas.

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On today's lesson we will learn...

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How to set up the Fibonacci expansion

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tool and...

. n ictr a d e How to combine it with the Fibonacci

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techniques learned.

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Strategy Essentials
Fibonacci Part 3.
What are Fibonacci Expansions?
Getting a good entry is as important as getting a EURO/U.S. DOLLAR, 1W, FX_IDX

1.272
good exit in your trades, the Fibonacci Expansion
1

w
tool is specially useful for traders because it helps

ic Tr a d es
them to set profits targets when a market is trending.

w
0.618

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B

Ret
Fibonacci expansion levels are drawn by tracking the

rac
.

e.
n

e
primary move of a price and its retracement. The

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ov
0

ym

nt.
ictr a d e
result of this would normally give you support and

ar
im
C
resistance areas that in other way would be difficult

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Pr
to get by using ordinary charting tools, in other
words; It would help you to determine where a price
might go after a retracement is exhausted. A
om
s.c

The main difference between extension and expansion levels is the quantity of points
you use to project your target; when you’re using two points alone, you’re using exten-
sions or retracements. If you’re using three points, then you’re using expansions

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Strategy Essentials
Fibonacci Part 3. How To Set Up The Fibonacci Expansion Tool.
If you are using MetaTrader
4 and would like to set up 1) 3)
this tool, you can find it by

w
the name Fibonacci expan-

s
sion tool on the MT4 plat-

e
form. In this example we 2nd click.

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w
are going to explain how
2)

Re
to set up this tool over an

tra
n
uptrend on Trading View’s

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ictr a d e

e.
platform.

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ym

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im
Step 1. At the left-hand menu of your chart, click

Pr
on the third top down option (1) and then select 3rd click.
the “Trend Based Fib Extension” tool (2).

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s.c
Step 2. Draw the levels as shown in (3) by clic- 1st click.
king over the low (first click) and high (second
click) of an up swing and then over its retrace-
ment (third click).

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Strategy Essentials
Fibonacci Part 3.
How To Set Up The Fibonacci Expansion Tool.

Step 3. Double click over the levels drawn to pop up the

format menu.

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w

e
Step 4. Get rid of the background by clicking on (4), then

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click on extend levels (5) and mark the following numbers: 0,

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0.618, 1, 1.618, 2.618, 3.618, 4.236 and 1.272 (the ones in red

ictr a d e
circles).

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5) 6) Step 5. To use one color for all the levels click on (6).

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Step 6. Save your set up by clicking on template (7) and then
4) 7) on “Save as...”
The common levels used for expansions are
0.618, 1.00, and 1.618
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Strategy Essentials
Fibonacci Part 3.
How To Draw Fibonacci Expansion Levels.
EURO / U.S. DOLLAR, 1W, FX_IDC This tool is applied by
1 ( 1.39783) Profit target. D using three price points,
Here is a bearish AB=CD equal measured move for example in this Euro/-

w
example; notice that, the CD leg is equal to the Dollar weekly chart up-

s
w
length of the AB leg (expansion level=1). In patterns

e
2) 2nd click. B like this one, is useful to apply the expansion level
trend, the 1st touch was

ic Tr a d
put on the start of the

w
tool because If we know the length of AB, we can

.
leg
target the potential point D. swing at (1), then the

.
second touch on the high

n
C-D
.

(end of the upswing) at (2)

leg

ictr a d e
and then the third touch

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A-B

on the retracement of the

B-C

0 ( 1.15943) last swing at (3).

leg

3rd click. 3)
.

C The tool will then project

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s.c
the primary move from its
A 1st click. 1)
retracement, to the next
potential profits targets.

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Strategy Essentials How To Draw Fibonacci Expansion Levels To Identify
Fibonacci Part 3.
AB=CD measured moves; Example 1.

GOLD FUTURES, 1M, COMEX

Expansion levels In this monthly chart of Gold futures, you
1)

w
A applied. can notice how the price successfully re-

s
w
acted to the equal measured move zone,

e
C 0

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this is; when the time of the AB leg was

w
0.618 equal to the time of the CD leg.

. n ictr a d e
B
1 GOLD FUTURES, 1M, COMEX
2) Long term buy setup at D
point, AB=CD measured move.

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D
A C 0
1.272
Long term buy setup at D 0.618
om
s.c
point; price reached the
AB=CD measured move. 1
B
See how in both cases the price peaked forming point A. Then made 1.272 D
a lower low to form point B, the formation of point C ended when Expansion levels applied.
the price made a lower high, and the point D is finally reached when
price dropped again, completing the pattern with a lower low

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Strategy Essentials How To Draw Fibonacci Expansion Levels To Identify
Fibonacci Part 3.
AB=CD measured move; Example 2.

S&P 500 E-MINI FUTURES, 1W, CME_MINI Lower high.

. A

w
D
R EN C

ic Tr a d es
P T 0

w
U

w. n ictr a d e
0.618

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DOWNWARD.
D 1
om B
s.c
Here in this weekly chart of the S&P 500, We 1.272
can spot another bullish version of the ABCD
equally measured move pattern. The measu-
red moves are reversal patterns. So, within an
uptrend, always try to look for a downward
price trend followed by a reverse that makes
a lower high.

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Strategy Essentials
Fibonacci Part 3. The 61.8 Fibonacci Expansion Level.

US DOLLAR CURRENCY INDEX, 1W, TVC.

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0

n ictr a d e

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0.618
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Expansion levels applied.

The 61.8 is the first important level of the tool, is here where we can see the price reverse when it
doesn’t make an equal or extended measured move from the first leg. This level doesn't usually act as a
strong support or resistance when the price approaches it directly, but it can be retested in a sideways
manner as it did here in this weekly chart of US Dollar Currency Index.
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 Strategy Essentials How to Combine The Retracement
Fibonacci Part 3.
And Expansion Tool to Set Profits Targets.
Confluence zone at the 1.13 (extension)
EURO/U.S. DOLLAR, 1W, FX_IDC
and 1 (expansion) levels.
1 ( 1.39783) 1.13 (1.44964)
1 (1.41020)

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g a ol
...
ap

in to
nd

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p F
fro lie ibo

sw on

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m d to na
up nsi th p cc

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e l ro i r
a n pa
en je etr

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gh ct t ac
to i ex

t o he em
ied cc

. f t ex en
he te t t
pl na

n re ns oo
ap o

tr io l
Fib

ac n
ictr a d e
em lev
en els
t.

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1 ( 1.39783) 0 (1.10680)
t.
... To its retracemen

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This Euro/Dollar weekly chart shows us the way to use the expansion levels combined with the extension levels to spot a
confluence zone where there is a major possibility for the price to reverse. Whenever you find confluence, prepare a plan
to most likely buy or, as in this case, sell a position. In this example, the price stopped going higher at the 1.13 extension
level and although the 1.272 and 1.618 extension levels are more popular places to take profits or scale out, the confluence
with the equal measured move put more weight to this zone making a great sell entry.

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Strategy Essentials
Fibonacci Part 3.
EURO/U.S. DOLLAR, 1W, FX _ IDC
1)
How To Combine The Retracement
And Expansion Tool To Set Sell Targets; Example 1.
1.272 EURO/U.S. DOLLAR, 1W, FX _ IDC Confluence at 2.618 (extension)
In this example of the Euro/Dollar chart, we would
1 1
2.618
and (expansion) levels.
have needed to overlap two expansions as is shown
in (1) and in ( 3) and one extension measured as in (2).

w
0.618

s
w

e
1 The first application of the expansion levels (black

ic Tr a d
lines) in (1), confluences as an equal measured move

w
0
0 at the 2.618 extension level in (2).

. n
Fibonacci extension
levels applied using
1

ictr a d e
Expansion levels the retracment tool. Confluence of two equal

2)
applied using the measured moves and the 1 2.618
expansion tool. 2.618 extension level.

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3)

ng
And in the second application of the expansion Re

wi
tra .

ps
levels in the prior trend as is shown in (3), the levels ce
. CD

tu
B =

io
om
s.c
A
found confluence; at a bigger equal measured

Pr
r
le
al
move (black line), with the 2.618 extension level 0
Sm

(red line) and at a smaller AB=CD equal measured Expansion levels applied for
a second time on the prior
move (purple line). upswing and its retrace.

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Strategy Essentials
Fibonacci Part 3.
How To Combine The Retracement
And Expansion Tool To Set Sell Targets; Example 2.

w
1.618

s
Confluence zone reached at 61.8 (red)

e
and 1 (green) level. 1.272

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w
1 0.618

. n
0.618

ictr a d e

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Retracement 0
levels applied.
s.c om Expansion levels
applied.
0

Once again! Another example on how to add Fibonacci Expansions to a Fibonacci Retracement tool.
The Fibonacci Retracement tool is used in this AUD/USD weekly chart to get potentials resistances
when projecting over the downward move. The market found a strong resistance at the 61.8 extension
and the equal measured move of the prior upswing (the confluence zone).

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 Strategy Essentials How To Combine The Retracement
Fibonacci Part 3. And Expansion Tool To Set Sell Targets; Example 3.
U.S. DOLLAR/SWISS FRANC, 1M, FX_IDC 1

Confluence zone reached at 0.5 (red) and

w
Here is another confluence 1.618 (green) level.

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w
zone example between a 0.786 2.618
50% retracement level (red)

w
and a 1.618 expansion level
0.618

.
(green).

n
1.618

ictr a d e
0.5
1.272

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0.382
1
0.618
Retracement
om
s.c
tool applied. 0
0

Expansion levels applied.

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Strategy Essentials How To Combine The Retracement
Fibonacci Part 3. And Expansion Tool To Set Sell Targets; Example 4.

U.S. DOLLAR/SWISS FRANC, 1M, FX_IDC

And finally another example 1

w
where price found resistance
between the 0.382 retrace- Sell setup: confluence zone reached at

s
w
0.382 (red) and 1.272 (green) level.

e
ment level (black line) and the
0.786
1.272 expansion level (green

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2.618

w
line).
0.618

. n
0.5 1.618

ictr a d e
0.382 1.272

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1
0.618

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s.c
Retracement tool 0
applied. 0

Expansion levels applied.

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Strategy Essentials How To Measured The Relationship Between Wave
Fibonacci Part 3.
One and Five; Example 5.

DAX Stock Index, 1W, SPECIAL 1 Ralph Nelson Elliott, a professional accountant, develo-
ped the Elliott Wave Theory in the late ‘20s. Its principle

1) consists that collective investor psychology moves be-

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WAVE I = WAVE V

V
tween optimism and pessimism of naturally sequenced

s
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e
2nd click. 0 IV analsys. The patterns consists in five and three-waves

ic Tr a d
and each individual wave has its own characteristic,

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3rd click. which reflects the psychology of the moment.

.
III

n
II
1

ictr a d e
I
2)
US DOLLAR CURRENCY NCY INDEX, 1W, TVC

V
0.618

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1st click.
0 IV
There is an Elliot Wave rule that claims that; If wave 3 had extended,
then there is a high chance for wave five to be equal to wave 1. So, In 2nd click. III 3rd click.

III
markets that show a five waves move in the direction of the main

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s.c
trend is very useful the expansion tool, because it will help us to know
the potential lenght of wave five. For example in this two charts (1)
WAVE I = WAVE V

II
and (2), we can see that when putting the expansions over a wave one
and projecting from the end of a wave four, the wave five turned to be I
of the same lenght of wave one, making this trades a great sell setup
for traders that were looking for this Elliot Wave rule in each market. 1st click.

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 f t hi s le sso n .
End o
ALMOST
THE...

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 NICTRADES BIZARRE ADVENTURES Based on real trades by N icola Duke.

ONCE UPON AN ELECTION NIGHT PART 3...

EURO/DOLLAR, 60, FX_IDC
0 (1.12996) 0 (1.12996)

I had to do some-
thing or I would
0.236 (1.11940)
be in trouble....
0.382

0.5

0.618 0.236 (1.11940)

Magico!
So I went down in a lower ti-
meframe and noticed this I looked at the spi ke and asked to myself; how do I
1 (1.12809) perfect AB=CD corrective know when it ends? So I used my fibonacci retra-
D
move... cement tool and marked the 23..6% level and if the
1
0.618 (1.11686) market was going below this level I would sel l it..
B
C-D leg

leg So the price came back and it sat

B-

B
A-
C

0 (1.12996)
0 (1.12996)
le

on the 23.6% (1.119). So I set an alert 0 (1.12996)

g

0 (1.09879) C

AB=CD 3rd click. and waited to sel l it below the

A 1st click.
23.6% with a stop around 1.120...

ICOLA SO
I was bearish anyway so I
N LD
real ly wanted to sel l it, but

,P
how?

UMP IT!
Profit target.
D

0.236
0.236 (1.11940)
(1.11940)
EXPANSION LEVEL TOOL
2nd click. B
leg

EQUAL MEASURED MOVE

C-D
B-C

INITIAL
leg

CRASH DOLLAR REVERSED A-

B leg

DECAY OF THE BULLISH MOMENTUM C

3rd click.

1st click.

EUR WEAKENED
A AB=CD

And I got into it simply; by seeing that this

0 (1.12998)
0 (1.12996) was an equal measured move and then wai-
0.236 (1.11940) ting for the break of that 23..6%
0.236 (1.11940)

11 (1.08520)
(1.08520)

But price came al l the way down and

kept coming al l the way down making
this MY BEST TRADE OF 2016!

DISCLAIMER: The views and opinions expressed in this pulp comic series are those of the authors and
do not reflect the official position of Nicola Duke’s thoughts, thus let’s look for a tongue in cheek and
very objective point of view as when sh*t happens for some, it means profits for others; A trader must
not pathologically (emotionally) follow spin media news, if you trade that way you’re propense to
THE END...
FOMO and not getting a profitable trade term just because you don’t endorse a politician or a sociolo-
gical topic of mass interest.
With this in mind your trades may not suffer from bad choices pushed by highly known newspapers,
reporters. activists. etc. For that same reason this Slice Of Life (Moments Of Everyday) short comic will
tell in its first mini volume about the real story of Nic’s best trade yet indirectly caused by over-slee-
ping and Trumps rise to power as when everyone was bashing their brains out, this is how she lived it. www.nictrades.com @NicTrades