Continuing our lessons from the last two days, let’s finish up on using Fibonacci extensions and when to take profit.
The examples illustrate that price finds at least some temporary support or resistance at the Fibonacci extension levels – not always, but often enough to correctly adjust your position to take profits and manage your risk.
Of course, there are some problems to deal with here.
First, there is no way to know which exact Fibonacci extension level will provide resistance.
ANY of these levels may or may not act as support or resistance.
Another problem is determining which Swing Low to start from in creating the Fibonacci extension levels.
One way is from the last Swing Low as we did in the examples; another is from the lowest Swing Low of the past 30 bars.
Again, the point is that there is no one right way to do it, but with a lot of practice, you’ll make better decisions about picking Swing points.
You will have to use your discretion in using the Fibonacci extension tool. You will have to judge how much longer the trend will continue. Later on, we will teach you methods to help you determine the strength of a trend.
For now, let’s move on to stop loss placement!
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