What Are Fibonacci Extensions?
💡 Definition
Fibonacci extensions project price targets beyond a completed swing using Fibonacci ratios (e.g., 127.2%, 161.8%, 200%, 261.8%). After an impulse and a retracement, extensions estimate where the next impulse leg may reach — useful for profit-taking, scaling, and mapping exhaustion zones.
Think of extensions as measured move multipliers. Once a pullback confirms, you project the prior impulse from the retracement point to anticipate where the move could logically extend.
Visual Representation
Impulse → Retracement → Extension Targets
Measure the impulse (A→B), wait for pullback (B→C), then project extension targets from C. Common targets: 127.2%, 161.8%, 200%.
Core Extension Levels & Usage
100% (Equal Move)
Classic measured move: next leg equals prior impulse length. Often first objective for scaling.
127.2%
Common continuation target after a clean 38.2%–61.8% retracement; frequent pause/TP zone.
161.8% (Golden Extension)
High-value target in strong trends; watch for profit-taking and potential reaction.
200% / 261.8%
Stretch targets on momentum runs; use only with strong confirmation and trailing risk.
Why Fibonacci Extensions Work (Practically)
- Self-Fulfilling Behavior: Widely watched targets attract orders and profit-taking.
- Symmetry: Markets often repeat leg lengths (equal move) during trends.
- Confluence: Extensions aligning with S/R, round numbers, prior highs/lows, or volume nodes gain significance.
- Risk/Reward Framing: Predefined levels help plan partials and trails objectively.
How to Draw & Use Extensions
Practical Playbook
1. Define the Impulse (A→B): Pick a clear swing move (trend leg) on your timeframe.
2. Confirm the Pullback (B→C): Use Fibonacci retracement or structure to locate C.
3. Project From C: Apply extension tool using A, B, then C; mark 100%, 127.2%, 161.8%, 200%.
4. Plan Exits: Scale partials at 127.2% / 161.8%; leave a runner toward 200% when trend is strong.
5. Trail Smart: Use swing pivots, MA/trendline, or structure beyond last higher low/lower high.
6. Add Confluence: Prior S/R, volume nodes (POC/HVN/LVN), round numbers, and candle signals.
Core Strategies
🎯 Golden Pocket → 127.2%/161.8%
Enter from a 38.2–61.8% pullback; take profits systematically at 127.2% and 161.8% with a trailer.
🧩 Confluence Targeting
Prior swing high + 127.2% or LVN + 161.8% = high-interest TP zone; watch for reaction or reversal.
⚖️ Equal Move Parity
Use 100% measured move as conservative target; reassess momentum for extended objectives.
🔄 Countertrend Exhaustion
In fading plays, watch 127.2–161.8% overshoots for reversal signals back into range (need strong confirmation).
Common Mistakes
⚠️ Avoid These Errors
- Projecting from an unclear or overlapping swing (dirty A/B/C).
- Ignoring trend context — extensions work best with healthy impulse–pullback structure.
- Targeting far levels without scaling out or trailing risk.
- Using extensions alone without S/R, volume, or price-action confirmation.
- Forgetting HTF influence — higher timeframe targets often dominate.
Advanced Concepts & Variations
📈 Multiple Swings
Layer extensions from primary and secondary swings; overlapping targets create powerful magnets.
🧭 Multi-Timeframe Alignment
Seek LTF entries when HTF extensions align with S/R or profile levels for precision and R:R.
🔗 Extensions + Channels
When projected targets align with channel lines or trendline fans, momentum follow-through improves.
🧮 Alternative Ratios
Try 123.6%, 138.2%, 176.4%, 223.6%, 261.8% — but keep your set consistent to avoid curve fitting.
The Bottom Line
Fibonacci extensions turn a confirmed pullback into a roadmap for targets. Use 127.2% and 161.8% for primary takes, 200%+ for momentum stretches. Anchor in clean swings, demand confluence and confirmation, and manage risk with partials and trailing stops.