 Hi in this video, I'm going to be talking about Fibonacci extensions and why they're used and how we plot Fibonacci extensions on a price chart on a candlestick chart, so with Fibonacci extensions, they are used as profit targets by traders, so let's go to Let's have a draw of the retracement. So in the last video We were looking at retracement. So this being the 100% Retracement and this obviously being zero and then this is percent. So try prices haven't retraced This is a hundred percent retracement if price does actually come down back to this low this is the high and We look for, you know numbers like the twenty three point six the thirty eight point two level six one eight seven eight six, etc. Etc. Now Obviously in an uptrend with looking for a retracement to come back down to a level this may be you know the Let's just say this say for argument's sake. It's the thirty eight point six level and We want to be a buyer at this level now for Fibonacci extension We want to find out or we want to project into the future. How far the trend may continue going Right, so we don't know how far prices will Will go so if we are buying here And we want to make we want to ride this potential wave higher so this is the low high and Potential higher high which will make this the higher low We would like to have some profit targets so we have a few Fibonacci ratio extension numbers that again derived from the Fibonacci sequence, so the most popular ones are the 1.272 the other one other two are the 1.414 and the 1.6 One Sorry about that six one eight And those are Fibonacci extensions those are levels that will be above the Zero level now it might not make sense to you right now But once we draw this on a price chart you will basically understand These ratios and exactly how to plot them and how they work, so let's go to a price chart so here we have the daily chart on the Australian dollar Japanese yen currency pair and We're looking for price projections once we enter on a retracement, so Let's take for example this swing here this this leg right So we have a High and then we have a retracement So we get our Fibonacci tool and then we project I will say we look for the retracement back into a particular level and as you can see from here That seemed to be a resistance level and now it has turned support so the 38.2 had percentage level retracement had a bit of confluence Historically right so what we're looking for now is Once we have entered here How far will price go? You know into the future And we want to look at those ratios So the 1.272 the 1.414 or the 1.618 now if we go into the Fibonacci tool and We actually put these prices in so we've got the 1.272 the 1.414 and the 1.618 what you'll see is Prices have actually been extended the other way All right, so obviously this is zero zero point two zero point three eight zero point five and Mrs. One so anything above one is actually going to be the other way So the one point two seven two one point four one four and one point six one eight But what we want to do is actually have these projections to the upside All right, so if you're on trading view What you can do is you can use this reverse feature and Once you press reverses Sorry about that once you press reverse it now projects the levels above where you want to You want to try and take some sort of profit, right? So Now we've inverted it and now we've got our projections in the future and profit potential profit targets we may have a Risk of let's do a long position. Let's say for example. This was our candlestick entry And maybe I'll stop his below the low and we want to obviously go for More than a one-to-one risk-reward ratio, we can actually set our profit targets So if we go for a one point two seven two extension if our and if our stop-loss was basically below the The support level went below the what where we would have entered We would be looking at a risk-reward ratio of two point seven Five to one if we went for the one point 414 we'd be looking at a three point nine percent Risk-reward ratio and if you went for a target of one point six one eight, which it eventually met And you can see it just kind of pinged off the level and pinged off the level We'd be going for all four point five five two one risk-reward ratio So this is a very good way for traders to project into the future where prices may want to You know, basically reverse from so again, we'll do another example of this on this chart so again, let's go to our Fibonacci retracement tool and let's take this leg here. So from this Level to here because we've obviously reversed it what we want to do is reverse it back and Again, it's coming to the thirty eight point two percent level And then if we look to the left it looks like that was a level of Support support resistance didn't act as resistance this time around But resistance acts as support here. So we had some compliments at this level We had an engulfing candle there and if we were looking for a Projection now what we would want to do is inverse The Fibonacci tool and look for potential extensions. So as you can see We get our risk reward tool if we entered on this candle here with our stop somewhere below here We can see that at the one twenty seven One two seven two. Yep extension. We'll be looking at a one point two risk rewards a One point four one four and we'll be looking at the One point six seven and then as you can see The one six one eight where prices came up to again, we had the Basically prices, you know stopped around here didn't move higher. So as well as profit targets Which is basically what the extensions of popularly kind of really popular What they used for You can also use the Fibonacci extensions as Levels of support and resistance or confluence as support resistance because if we maybe look to the left and see if there was any kind of Support or resistance level at that level Yeah, potentially actually there was and look like let's have a look so Right, so if we extend all the way back At this level You can start to see it was an area of interest So we had support support bit of resistance prices came back up into this level It would have been a good level to look to take some sort of profit so Fibonacci extensions are Are great ways to look to take profit and when you're riding the trend if you want to also if you're using trading view and you don't want to use the the reverse feature in With the Fibonacci Sorry retracement tools. You'd have to always keep reversing it what you can do They have a tool Which is the Fibonacci trend based fib extension. I'll go back to that again. So it's the trend based fib extension and It will give you the same Extensions and how you use it is you Go from the low to the high again if you were You know looking for an uptrend it's always you drag in the direction you want to trade and then what you would do is go back down to the low and This gives us again our projection if I was to go back to the Fibonacci retracement and do the same thing here and then reverse The Levels you can see that they exactly match. So you have two ways of Using the Well of how to project with the Fibonacci extensions So hopefully that helps and if you do have any questions just email me at info at trading 180.com