Auto Fib Extension Indicator is a newly developed pine indicator based on the famous Trend-Based Fib Extension and Auto Fib Retracement indicator drawing tool. Traders use Fibonacci extensions to establish profit targets or estimate how far price travels after finishing a retracement/pullback. Also, in cases where prices may reverse, there is a possibility of extension levels. (Click this link to access an economic calendar for your trading strategies)
Features of Auto Fib Extension Indicator
• The indicator uses three points.
• The first two-point is used to define trend lines.
• The last point indicates the retrenchment levels.
• The indicator gives an indication of the level of price that can be reached after correction.
Calculation of Fibonacci Extensions
Generally, the indicator does not have a formula. Traders only have to choose the three points that are characterized by the indicator. After selecting the lines, they are then drawn at a moving percentage. The first point indicates the start of a move, the second the end of the movement, whereas the third point is the retracement end against the move. With the extensions, traders can have a projection of the possible direction of the price.
Calculations of the Fibonacci Retracement Levels
To calculate the retracement levels, multiply the difference between the two points picked by the desired ratio, which will give a dollar amount.
If the projection on price is on a higher-end, add the result above to point three, and consequently, if a projection of price is low, subtract the dollar amount from point three.
What does Auto Fib Extension Indicator tell you?
The main objective of Fibonacci extensions is to establish a price target. When prices move to one level, there is a high probability that they will move to the next level. The Fibonacci extension turns very interesting with such scenarios because there may not be reversions or price stops, but the surrounding areas may be critical.
The indicator can indicate the next price movement for traders who are long on a stock and there emerge new price high. The same experience is expected for a trader who is short where the indicator can be used on profit target placement.
What are the differences between Fibonacci Extensions and Fibonacci Retracements?
Extensions are responsible for showing where the price will go when a retracement occurs. On the other side with retracement levels, traders can understand the deepness in which a retracement could go. This conclusively means that Fibonacci retracements identify pullbacks within a trend, whereas Fibonacci extensions measure the impulse wave in the trend direction.
What are the limitations of the Auto Fib Extension Indicator?
The indicator cannot be used solely to indicate whether to buy or sell a market. For maximum guidance on decision-making, it is wiser to use the indicator alongside other indicators in the determination of single or multiple price targets
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