Fibonacci Extensions are an indicator that can be used in trading when you want to know when the prevailing trend is over and when the next rally might begin. The key thing about the Fib extension is that it works best after the prevailing trend has stopped. Its use is similar to using price targets, but using Fib extensions results in more accurate predictions about a stock’s future moves. A Fibonacci extension (or “Fib extension”) is a tool that helps predict where a stock might go in the future based on its performance to this point. It also helps predict if a potential trend reversal has taken place, or whether the prevailing trend will resume in the future.Fib extensions are particularly useful in determining price targets after the prevailing trend has stopped. By spotting trends before they can turn into reversals, you can determine the right time to buy or sell stocks in your portfolio, based on what they should be worth at different points in time.Diagram of Fibonacci extensions:-These Fibonacci extensions are used to determine price targets after the prevailing trend has resumed. To calculate Fib extensions, we start with the strikes of the previous candlestick, then add the distance from the lower and upper line of the current candlestick. Then we add 1 to the result. In other words, the further above or below a candlestick's current price is, the larger that candlestick’s extension will be. We then calculate Fib extensions for both up and down moves in an uptrend or downtrend.Fibonacci extensions are used to determine market expectation and price targets after the prevailing trend has resumed. The Fibonacci sequence is a geometric progression that works by dividing a given number into two to get another given number.
