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

    What does a double bottom tell a trader about the overall trend?

    Learn how a double bottom pattern forms on a price chart and why many traders consider double bottoms to be a sign of reversal in the price trend.
  7. Trading Strategies

    What are the main differences between a double top and a double bottom?

    Identify double tops and double bottoms, and learn what each could mean for the security's current price trend. Discover how other indicators verify movements.
  8. Technical Indicators

    What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these approaches to buying the market.
  9. Technical Indicators

    What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of your investment.
  10. Forex Strategies

    Are Doji patterns important when trading forex pairs?

    Find out why forex traders make heavy use of candlestick patterns such as the doji, which can be used as a signal of market indecision and coming breakout.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

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

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. 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 ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center