What goes up must come down! – How I use ‘FIB Extension’ – Fibonacci Extension

Bull runs are great, aren’t they? Unfortunately though as the title says the old adage is true.

It goes up it comes down = volatility.

Bitcoin is extremely good for this and makes trading fast and fun, if you’re on the correct side of the trades.

Bitcoin, and cryptocurrency in general, is the stock market… On steroids, wheeeeee.

There can be lots of money to be made/transferred to the educated, or lucky, but that would quickly run out. Knowing where to buy and sell intentionally is the way forward.

Right, enough gibberish… Fibonacci Extension. Just like Fibonacci Retracement only this time the extension can be used to find the lower level price when Bitcoin is on a decline.

There is more than one way to use the Fib extension, but this is the way I like to use it.

To quickly recap; I use Fibonacci Retracement when Bitcoin is ascending (aka on a ‘Bull Run’) and I only use Fibonacci Extension when Bitcoin is descending (aka Bear Run).

NOTE: None of this is “fool proof” these levels are not set in stone. You will need to use all the other indicators, which I have mentioned on this site, and other trading analysis tools. These, combined with your decision making, can lead to educated buy and sell entry/exit points.

Let’s start.

Bring up your TradingView chart and head back to the drawing tools section and select ‘Gann and Fibonacci Tools.

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This time we’re going to use the ‘Trend-Based Fib Extension’

Seen here:

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This tool gives you 3 points to place on the chart. These are A,B and C. Lots of people place these points in different places. I am going to show you what works for me.

I use point A at the highest price. Point B goes at the bottom of the first bounce area. I then drag point C back to point A, technically not really using C at all.

Again, I never use the top of the wick, just the highest price point.

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This will then create downwards Fib levels, like this:

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Voila – Potential support lines.

Remember; no one knows for sure where Bitcoin will go, these are just very likely to be areas where the price may bounce, stabilise or change direction. You will need to use your discretion wisely.

Manage your risk with all other indicators and tools before making a trading decision.

Another, easier way to do this would be to use the Fibonacci Retracement tool. Using this tool only requires 2 points and shows the same levels. This is what I mainly use.

Use this tool in reverse. The first bounce area is point A, the high point is B. Place the Fib Retracement tool at point A first and drag back up to the high point.

This will then show the support lines in the same way.

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This is quite tricky to explain but hopefully you get the idea.

Are you confused by this? Hit me up in the comments section and I will do my very best to answer any questions.

If you do this differently how do you do it? I’m always willing to learn and try new things. Let me know in the comments, would love to hear from you.

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