2. POINTS TO BE COVERED TODAY:
Drawing Fibonacci Expansion Levels on Upward and Downward Gold Trend
Fibonacci Expansion Levels
Draw Fibonacci Expansion Levels on MetaTrader 4 Platform
Divergence Trading Setups Trading Gold Using Divergence Trading Setup
3. Drawing Fibonacci Expansion Levels On
Upward And Downward Gold Trend
We have looked at Fibonacci retracement in the
previous learn Gold trading lesson, drawn between 2
chart points.
But to plot Fibonacci expansion levels we use 3 chart
points.
To draw these levels we wait until the retracement is
complete and the XAUUSD metal starts to move in
the original direction of the Gold price trend.
Where the retracement reaches is used as point 3.
4. Fibonacci Expansion Levels
The diagram shows the 3
Points where the Fibonacci
extension levels indicator is
drawn - marked as 1, 2 and
3. Point 1 is where the trend
started, Point 2 is where the
trend started to be pulled
back and retraced and Point
3 is where the retracement
reached as shown on the
example below.
Please note where these
Fibonacci expansion levels
are plotted - they are drawn
above the indicator, these
are the points where the
trader will set the take profit
orders.
5. Drawing Fibonacci Expansion Levels On An
Upward Gold Price Trend
We use Fibonacci extension levels to estimate where the
movement will reach.
There are 2 important extension levels; 61.8 % Fibonacci
expansion level and 100 % Fibonacci expansion level, these
levels are used for taking profit.
Fibonacci extension is plotted along the direction of the trend,
since the trend is upward - the Fibonacci expansion is plotted
upwards.
These Fibonacci expansion levels are displayed as horizontal lines
above the indicator, showing profit taking areas.
6. Fibonacci Expansion Levels Drawn
On An Upward Gold Price Trend
This is the same trade from the previous
example where we used Fibonacci
retracement to buy at around
retracement level 38.2 %Fibonacci
retracement level.
At the same time we have used Fibonacci
expansion level 100 % to set take profit.
Now find a Gold price chart and practice
these strategies.
The upward trend continued and both
Fibonacci Expansion 61.8 % and 100.0 %
levels were all hit after which price
retraced again after hitting the 100.0 %
Fibonacci extension level.
7. Drawing Fibonacci Expansion Levels On A
Downward Gold Price Trend
We plot Fibonacci expansion levels indicator from point
1 to 2 to 3 as shown below. Remember we always plot
this tool in the direction of the trend.
In the example behind, can you figure what direction we
have drawn it? That is right - downwards because the
trend is downwards.
Try and see the difference between how we have drawn
it above and how it is drawn below.
This time you would also have used Fibonacci extension
level 100 %, see just where the price reached.
That would have been a nice take profit area.
From the example behind, after plotting this Fibonacci
expansion tool there are two levels that are used to
show the profit taking areas, these two levels are
plotted as horizontal lines across the price chart (these
levels are 61.8 % Fibonacci expansion level and 100 %
Fibonacci expansion level as shown above).
8. How To Add This Fibonacci Expansion Levels
Tool On Meta Trader 4 Platform
Steps: This tool is not displayed by default in MetaTrader 4 default settings, if the
button does not appear on your MetaTrader 4, (no need to download this indicator)
then locate the "MetaTrader 4 Line Studies Toolbar" shown below and follow the
steps below:
9. How To Add This Fibonacci Expansion Levels
Tool On Meta Trader 4 Platform - I
Customize Line Studies Toolbar
Right click the Customize button (shown below) >> A drop down menu appears,
Select Customize >>
10. How To Add This Fibonacci Expansion Levels
Tool On Meta Trader 4 Platform - II
Place This Tool on MetaTrader 4 Platform
Select the expansion tool from the pop up window that will then appear >>
Click Insert button >> Click Close.
12. Shortcut Of How To Add Fibonacci Expansion
Tool
You can also use this
shortcut instead of
the above method,
do this:
Click "Insert Menu"
Click Fibonacci
Click Expansion
13. Steps On How To Draw Fibonacci
Expansion Levels
Steps: Once you have added
this Fibonacci expansion
button, you can draw this
tool by selecting it and
drawing it on a Gold price
chart.
The 3 chart points will be
marked 1, 2 and 3, select
the Fibonacci indicator, place
the indicator on point 1 and
while still holding down the
mouse button drag the
mouse up to point marked 2.
14. How To Adjust This Tool On A
Gold Chart
Steps: Once you have drawn this Fibonacci expansion indicator, you may
need to move one point or another to the exact position where you precisely
want.
These 3 chart points are marked 1, 2 and 3 and these are used to change the
settings after this Fibonacci expansion indicator has been drawn on a Gold
price chart.
To change the settings; do this, double click the indicator, it appears as dotted
lines (shown above), three cursor points appear which are marked 1 2 3, you
can then use these 3 points to adjust and fit the indicator accordingly to your
price chart (just click on the point you want and move it).
15. Divergence Trading Setups Trading Gold
Using Divergence Trading Setup
Divergence is one of the trade setups used by Gold traders to analyze prices
of Gold and try to predict the next likely direction of these gold prices. It
involves looking at the Gold price chart and one more indicator. For our
example we shall use the MACD indicator.
To spot this divergence trading setup find two chart points at which price
makes a new swing high or a new swing low but the MACD indicator does not,
indicating there is a divergence between the price and the momentum.
To look for divergence trading setups we look for two chart points, two highs
that form an M-shape on the XAUUSD price chart or two lows that form a W-
Shape on the XAUUSD price chart. Then look for the same M-shape or W-
Shape on the indicator that you use to trade.
16. Gold Trading - Divergence Trading Setup -
Drawing Divergence Trading Lines
The XAUSUD price chart
above shows an example
of one of the four types of
divergence trading
setups, the one above is
known as hidden bearish
divergence, one of the
best types to trade.
Different types of
divergence trading setups
are covered in the next
lesson.
17. How To Spot Divergence Trading Setup
In order to spot Gold divergence trading signal we look for
the following:
HH=Higher High- two highs but the last one is higher
LH= Lower High- two highs but the last one is lower
HL=Higher Low- two lows but the last one is higher
LL= Lower Low- two lows but the last one is lower
