How to Trade with Fibonacci Expansion

Fibo expansion is drawn using 3 chart points.

To draw Fibonacci Expansion levels we wait until the gold price retracement is complete and the gold price starts to move in original direction of the XAUUSD trend. Where the retracement reaches is used as chart point 3.

The Fibo expansion example illustrated & shown below shows the 3 Chart Points where the Fibo expansion indicator is drawn, marked as Chart point 1, 2 and 3. Chart point 1 is where the xauusd trend started, Chart point 2 is where the xauusd trend pulled back and retraced & Chart point 3 is where the xauusd retracement reached as displayed on the Fibonacci Expansion Tool example shown below.

XAUUSD Trade with Fibonacci Expansion?

Please note where these Fib Expansion zones are drawn - Fibo Expansion zones are drawn above the Fib Technical Indicator, these are points where the trader will set the take-profit orders using these Fibonacci Expansion Levels - 61.80% and 100% Fibonacci Expansion Areas.

Drawing Fibonacci Expansion Levels on an Upward Gold Trend

We use Fibo expansion areas to estimate where the market trend movement will get to. There are 2 important Fibo expansion levels: 61.8% & 100% Fibo Expansion Areas, these are used for taking profit.

On the Fibonacci expansion example shown below you can see that the Fibonacci expansion technical indicator is drawn along the direction of the trend, since the trend is upward - the Fibonacci expansion is drawn upwards.

These Fibo expansion levels are displayed as horizontal lines above Fibonacci Expansion technical indicator, showing the profit taking areas. In the xauusd example shown below if you had used of 100% Fibonacci expansion you would have made nice profit from the trade setup.

Drawing Fib Expansion Levels on an Upwards XAUUSD Trend - Fibonacci Expansion Strategies in XAUUSD

From the above Fibonacci expansion examples, the upward trend continued and both 61.8% & 100.00% Fibonacci expansion levels were all hit after which gold trading price retraced again after getting to the 100.0 % Fibonacci Expansion level.

Drawing Fibo Expansion Levels on a Downward Gold Trend

Since we use this Fib expansion tool to estimate take profit levels, how do we draw it in a downwards XAUUSD trend?

We draw the Fibonacci expansion indicator from chart point 1 to 2 to 3 as shown below. Remember we always plot this Fibo expansion tool in the direction of the market trend. In the Fibonacci expansion example shown below, can you figure what direction we have drawn it? That is right - downwards direction.

Try & spot difference between how we have drawn Fibonacci expansion above and how Fibonacci Expansion is drawn below. This time you would also have used Fibonacci expansion level 100%, just where the price reached as illustrated on the xauusd example shown below. That would have been a nice take profit area.

Drawing Fib Expansion Levels on a Downwards XAUUSD Trend - Fibonacci Expansion Strategies in XAUUSD

From Fib expansion example above, after drawing this Fib expansion tool there are 2 levels which are used to show the profit-taking areas, these two Fibonacci expansion levels are drawn as horizontal lines across the gold trading price chart.