There is more to the world of Fibonacci than retracements, arcs, fans and timezones! Every year new methods are developed for traders to take advantage of the uncanny tendencies of the market towards derivatives of the golden ratio. Here we will discuss some of the more popular alternative uses of Fibonacci, including extensions, clusters and Gartleys, and we’ll take a look at how to use them in conjunction with other patterns and indicators.
Fibonacci Extensions Fibonacci extensions are simply ratio-derived extensions beyond the standard 100% Fibonacci retracement level. They are extremely popular as forecasting tools, and they are often used in conjunction with other chart patterns.
The chart in Figure 1 shows what a Fibonacci extension forecast looks like.
The above is an example of how the Fibonacci extension levels of 161.8% and 261.8% act as future areas of support and resistance.
Here we can see...
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