HOW TO USE FIBONACCI EXTENSION

Fibonacci is a technical tool, essentially an automatic tool for building support and resistance levels. They need to be supplemented by:

Standard support and resistance lines
Trend lines
Japanese candlesticks
and additional indicators

Then they will be a good assistant in your trading. This is how a trading strategy is created, based on the combined instruments and the study of their features in different market conditions.

The three most important Fibonacci retracement levels are:
0.382 (38.2%)
0.5 (50.0%)
0.618 (61.8%)

All other levels, say 0.236 or 0.764 are secondary.

And these are important expansion levels:
1.272 (127.2%)
1.414 (141.4%)
1.618 (161.8%)

It's not difficult to use Fibonacci. Swings (upper and lower), as the maximum and minimum price values, are taken. From them, a fibo is drawn, and its lines are used as hints for support and resistance levels. It is up to you to decide whether to use Fibonacci in your trading. As we know from self-fulfilling prophecy, the more traders use a certain tool, the more important it become to the markets. Also, Fibonacci is a very popular tool, which often pops up on the charts of professional currency traders as well. So, it's a prophecy that comes true quite often.

Now let's expand our Fibonacci tool by examining the uptrend. We see that the 1.272 and 1.414 levels work as resistance, and after a couple of unsuccessful breakout attempts, as we can see many pinbars, the price might just go down and make another pullback.

Now let's do the same thing with the downtrend. Let's pull the fibo extension tool.

And here's what's happened:
Price ran into support, then broke through it. It was the level that was held up before the price went down. Price action made a new low. Fibo extension level 1.414 lines up with psychological level 1.59000. From these examples we can see that Fibonacci extension level is logical and often (though not always) form temporary support and resistance levels.

Remember, there is no guaranteed way to tell when a Fibonacci level will work as resistance or support. However, by applying all of the technical analysis techniques you've learned so far, you'll significantly increase your ability to identify these situations.

Therefore, you should consider Fibonacci expansion and retracement levels as an auxiliary tool that may be useful in some cases. But don't expect the price to bounce off right away. Fibonacci levels are your area of interest. If any candlestick combinations are formed near these levels, if oscillators or other instruments show anything curious, it is time to be alert.