How to Trade with Fibonacci Projection - Fibonacci Projection Strategy using Fibonacci Projection Levels
What is Fibonacci Projection in XAUUSD?
Fibonacci projection is drawn using Three chart points.
To draw Fib Projection levels we wait until the gold price retracement is complete & the price starts to move in original direction of the XAUUSD trend. Where the retracement reaches is used as chart point 3.
The Fibonacci projection example shown below shows the 3 Chart Points where the Fibonacci projection 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 illustrated on the Fibonacci Projection Tool example shown below.
XAUUSD Trade with Fibonacci Projection? Fibonacci Projection Strategy using Fibonacci Projection Areas
Please note where these Fib Projection levels are plotted - Fibo Projection zones are plotted above the Fibo Indicator, these are points where the trader will place the take-profit orders using these Fib Projection Levels - 61.8% & 100% Fib Projection Zones.
Drawing Fibo Projection Zones on an Upwards Gold Trend
We use Fibonacci projection levels to estimate where the trend movement will reach. There are 2 important Fibonacci projection levels: 61.8% & 100% Fibo Projection Levels, these are used for taking profit.
On the Fibonacci projection example shown below you can see that the Fibonacci projection technical indicator is drawn along the direction of the trend, since the trend is upwards - the Fibo projection is drawn upwards.
These Fib projection levels are displayed as horizontal lines above the Fibonacci Projection technical indicator, showing profit taking areas. In the xauusd example shown below if you had used of 100% Fibonacci projection you would have made nice profit from the trade setup.
Drawing Fibo Projection Zones on an Upwards XAUUSD Trend - Fibo Projection Strategies in XAUUSD
From the above Fibonacci projection examples, the upward trend continued and both 61.8% & 100.0% Fibonacci projection levels were all hit after which gold price retraced again after getting to the 100.0% Fibo Projection level.
Drawing Fibo Projection Levels on a Downwards Gold Trend
Since we use this Fibonacci projection tool to estimate take profit levels, how do we draw it in a downwards XAUUSD trend?
We draw the Fibonacci projection indicator from chart point 1 to 2 to 3 as shown below. Remember we always plot this Fibonacci projection tool in the direction of the trend. In the Fibonacci projection example shown below, can you figure what direction we have drawn it? That is right - downwards direction.
Try & spot the difference between how we have drawn Fibonacci projection above and how Fibonacci Projection is drawn below. This time you would also have used Fibonacci projection 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 Fibo Projection Levels on a Downwards XAUUSD Trend - Fibo Projection Strategies in XAUUSD
From the Fibonacci projection example above, after drawing this Fibonacci projection tool there are two levels that are used to show the profit-taking areas, these two Fibonacci projection levels are drawn as horizontal lines across the gold price chart.
