Fibonacci extensions can help us measure and understand the wave structure of a trend. At the same time, we can use the Fibonacci extension tool to find overextended trends that have a higher likelihood of reversing. This can increase our odds significantly.
Let’s recap:
▪ Some people might draw Fibonaccis differently but since Fibonacci levels are percentage-based, you can draw them both ways – the result is always the same
▪ Look for a good confirmation of the C point which is the retracement wave
▪ The best reversals usually happen after a 168 or 200 Fibonacci extension move. A trend then becomes over-extended
▪ A trend with a 138 Fibonacci extension usually does not lead to a long-term reversal
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