Fibonacci Extensions

AAA

DEFINITION of 'Fibonacci Extensions'

Levels used in Fibonacci retracement to forecast areas of support or resistance. Extensions consist of all levels drawn beyond the standard 100% level and are used by many traders to determine areas where they will wish to take profits. The most popular extension levels are 161.8%, 261.8% and 423.6%.

Fibonacci Extensions

INVESTOPEDIA EXPLAINS 'Fibonacci Extensions'

In practice, most traders use Fibonacci extensions in combination with other technical indicators/patterns to help them determine appropriate target prices. As this chart shows, the 161.8% level is often used to set the price target on a breakout of an ascending triangle. This specific target is calculated by multiplying the vertical distance of the triangle by the key Fibonacci ratio of 61.8% and then adding the result to the upper resistance of the triangle.

RELATED TERMS
  1. Fibonacci Numbers/Lines

    Leonardo Fibonacci was an Italian mathematician born in the 12th ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  3. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  4. Price Target

    1. A projected price level as stated by an investment analyst ...
  5. Breakout

    A price movement through an identified level of support or resistance, ...
  6. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
Related Articles
  1. Active Trading

    Fibonacci And The Golden Ratio

    Discover how this amazing ratio, revealed in countless proportions throughout nature, applies to the financial markets.
  2. Trading Strategies

    What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. However, Fibonacci's ...
  3. Trading Strategies

    How can I determine a stock's next resistance level or target price?

    Determining where the price of an asset will stop once it has created a new high is one of the most difficult tasks for any trader. There is no magic way to determine what price an asset is likely ...
  4. Active Trading

    Advanced Fibonacci Applications

    Extensions, clusters, channels and more! Discover new ways to put the "golden ratio" to work.
  5. Active Trading

    Taking The Magic Out Of Fibonacci Numbers

    Uncover the history and logic behind this popular trading tool.
  6. Trading Strategies

    Why is On-Balance Volume (OBV) important for traders and analysts?

    Discover reasons why the on-balance volume momentum indicator has become one of the most widely used and trusted tools of technical analysis.
  7. Technical Indicators

    What are the best technical indicators to complement On-Balance Volume (OBV)?

    Discover why it is important to confirm the price trend signals generated from the on-balance volume indicator and which indicators make the most sense.
  8. Technical Indicators

    How effective is it to create trade entries after spotting a Marubozo pattern?

    Understand the significance of the marubozu candlestick pattern, and learn how traders who recognize the pattern create effective trade entries and exits.
  9. Trading Strategies

    How do I build a profitable strategy when spotting a Marubozo pattern?

    Learn how to create a simple trading strategy based on the indication of trend continuation given when a marubozu candlestick pattern appears.
  10. Technical Indicators

    What is a common strategy traders implement when using the Negative Volume Index (NVI)?

    Learn a simple trading strategy that can be created using just a couple of moving averages and the negative volume index indicator.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center