Fibonacci Extension

karutunian

Can anyone tell me if it's possible to get a Fibonacci Extension tool on StockCharts?

Kevo

Yes, the feature already exists. Just hold the CTRL button down before placing the Fib Retracement.

karutunian

Thanks Kevo!

karutunian

Just in case anyone is using a Mac...it's the Command button to engage the extension.

Kevo, sorry to be a pain, I have another question. Can I customize the extension? It's only giving me 161.8% I'd like to add a couple more levels.

Thanks!

Kevo

Instead of stacking 2 or more Fib Retracements, try clustering 2 or more Fib Retracements. By clustering I mean at least 1 smaller Fib Retracement is in a larger Fib Retracement. By stacking, I mean a second or more Fib Retracements are attached to the bottom or top of another one. I think the cluster might help.

Normally, clustering is used when there is more than one pair of troughs/peaks nearby. In the cluster, it just so happens that one Fib Retracement ends up inside the other. Your scenario is a little different.

I have not tried this. So, you would have to experiment to see if it works. For example, you could add the second one from the 100% to the 162%; something like that. I have not tried this because so far I have used Fib Retracements to forecast the counter-trend support/resistance of the prior price move.

karutunian

I get what you're saying about drawing from the "0" or "100" to try to get extensions above and below. I'll have to try that out to see how it compares to using an extension tool.
Kevo, do you have any charts you'd share with the community with how you're using Fibonacci Retracements?
I wish StockCharts would sponsor some type of formal education on this tool. It's an amazing tool, even with my limited understanding...and can imagine how much more powerful it could be if I had some quality knowledge in using them.

So, when you're applying them, are you working with daily, hourly or minute(s)?
Do you have any advice for educating myself on the trends or patterns within these Fibonacci levels? Hope that makes sense! I guess I'm asking if there are things like Gartley patterns to look for with stocks? Maybe there are other patterns?

I would appreciate any info you can share to help me learn more about Fibonacci Retracement/Extension.

Thanks for you time!

Ken

markd

There is quite a lot of information available through the Stockcharts site for fibs.

Enter "Fibonacci" in the "Search Stockcharts.com" window on the members page. There are blog entries, videos and chart school articles available. Also, if you scroll down the page, there are quite a few articles from Stocks and Commodities magazine.

Here's one that outlines a simple, practical approach to applying fib lines:

https://technical.traders.com/archive/articlefinal.asp?file=\V15\C11\USINGFI.pdf

markd

Sorry, link above requires signing in to traders.com - it doesn't go directly to the article.

It's the third from the bottom in the Stocks and Commodities section at the bottom of the results page.

V.15:11 (477-482) Using Fibonacci Ratios and Momentum by Thom Hartle - TAS

karutunian

Thanks markd. I'll have a look on this service for those vids and blogs. I've done some youtube "studies" which have been somewhat helpful.
Yeah, I clicked on the link and hesitated opening a trial account. I *think I've got the simple fib stuff down. It's really extensions that I'm wanting to learn. Not entirely sure what to do if I don't have an A, B, C type of correction. Does this simply mean that I shouldn't attempt to use an extension or do I just draw back to my high or low?
The tool used on StockCharts is different than the tool used on Think or Swim. On other sites, it's a 3 point approach to drawing the extension. Not sure why StockCharts is different?! Also, the tool on this site is lacking several points within both Retracement and Extension. Guess it's not something I can customize.

I want to be sure I'm using these tools properly so I can gain confidence in what I'm seeing or think I'm seeing.

markd

While learning from what others have done is always useful as a starting point, my suggestion would be to take EVERYTHING you read with a grain of salt and do your own research.

Nothing about the markets is "true" the way, say, the laws of physics or mathematics are true. So prices don't HAVE to reach an extension level or retrace to an internal level. Instead there is only a(n) (unknown) probability that they will make those levels and/or reverse there.

Remember, what you see on many sites is meant to sell you stuff or to make you feel confident enough to trade on that site. Much of it sounds plausible, and may be put out there in good faith, but it's not necessarily scientifically or academically rigorous. Also, it may have been true at one time but maybe not so much anymore.

So, devise your own method of applying the fib levels and collect lots of examples of when they work and when they don't. It's work, but it will give you a truer understanding of the odds before you put your money down. The usefulness of fibs, to me, is that they create a framework or context to judge price action by marking decision points - if/when prices reach those levels, those are points to consider an entry or exit based on the price action occurring there (buyer or seller exhaustion vs. seller or buyer strength).

But they are not exits or entries on their own. Sometimes the market seems to respect a fib level almost to the penny, other times it will blow right past it and turn at a level that seems to correspond to no fib level at all, no matter how many you try. Another problem with fibs is there are potentially so many to choose from. You can draw fibs on any time frame and any of them could be valid. So, which do you choose? Are there rules for fib construction? Can you use closes, or just highs and lows? Any high or low? Does volume matter - so highs or lows with high volume make better fibs than low volume highs and lows? How long is a fib level effective? Just while price is within the fib (and it's projections? What if price leaves and comes back into the fib set? Do the levels still work? Why should they work at all? Some people argue fibs are illusions - price has to go somewhere and it has to stop somewhere. If you put enough lines of the chart some of them are bound to get hit. There may be something to that.

Nevertheless, I think fibs are useful illusions and that's the best way to look at them. Pick a method for applying them, test it, and if it "works" well enough (helps you see trades and increases the odds of a successful trade), stick to it.

karutunian

Excellent advice markd!
The reason I'm so intrigued with fibs at this time is because of recent massive selloff's with TWTR, KNDI, WFM and many others. There's something useful about knowing whether or not it's broken beyond "normal" levels and what the difficulties might be for taking a position with price as well as the time frame for holding.
That's the "usefulness" that I think fibs have to offer.
Other than that, I can see evidence on strong uptrends with pullbacks into the 38.2% and bouncing or breaking below to test the 50%/55% level. I've seen this over and over again.
These levels in conjunction with MACD, Stochastic, Money Flow and ADX with DI+ and DI- I think are giving me a shot at getting a "real" understanding of what's going on.
Since I've taken some positions on stochastic oversold signals...I've started applying the fibs to see where I am and what I can target...even if it is an illusion...it prepares me mentally so I'm not second guessing the indicators of my choice.
Your advice is spot on...this is about me and my journey. Seeing how others use the tool can be helpful, but it's best for me to learn to use the tools to meet my objectives.
I guess I'm just wanting to make sure I'm reducing as much "trash in" as possible. I know that there are many ways of solving problems in this world...there's no hard and fast rule that says we must do it a certain way. Frankly, the more we can venture from conventional wisdom and find our own solutions...the more likely we are to succeed.

Thank you for your input!

Ken

Kevo

Thanks @markd for the comments. I have a couple of comments I would like to add.

Fib Retracements is a tool to forecast/measure Support/Resistance. Fib Retracements is just one of many tools, techniques, and methods of measuring Support/Resistance. Support/Resistance is one of many TA metrics. In terms of importance, I rank Support/Resistance in the middle of the metrics list; sometimes lower or higher. I am just putting Fib Retracements in perspective.

Second, here is a quote from @karutunian :

Kevo, do you have any charts you'd share with the community with how you're using Fibonacci Retracements?

During the sustained and severe oil downturn, I used a Weekly chart on XLE, and saw support at the 62% retracement. For the run of the mill, average pullbacks, I use Daily charts. I have never use the extensions maybe because other metrics may provide answers.

Don't forget about the Fib Retracement clusters.

Totally agree:

Your advice is spot on...this is about me and my journey. Seeing how others use the tool can be helpful, but it's best for me to learn to use the tools to meet my objectives.
I guess I'm just wanting to make sure I'm reducing as much "trash in" as possible. I know that there are many ways of solving problems in this world...there's no hard and fast rule that says we must do it a certain way. Frankly, the more we can venture from conventional wisdom and find our own solutions...the more likely we are to succeed.