Having received many requests from our loyal family members I’ve decided to explain the easy way to draw the Fibonacci retracements and extensions.  This technique not only will give you significant retracement levels but it will actually give you the Fibonacci extension levels for taking profits.

The traditional way of drawing the Fibonacci is from swing low to swing high for an uptrend and swing high to swing low on a downtrend.

By drawing the Fibonacci in reverse, swing low to swing high on a downtrend and swing high to swing low on an uptrend you will be producing the Fibonacci extension levels for taking profits.  If you are using TradingView there is actually an option to “Reverse” your Fibonacci levels so you can continue to use it the same way but in reverse.

There’s really nothing complex about it, the significant retracement level of 0.382 and the 0.618 are just reverse and the 0.50 remains the same.  Traditional or reverse the three retracement levels fall on the same lines and have the same ratio. I don’t really look at the numbers when I use the retracement, I just look at the importance of the lines to which the retracement will go.  By having the settings this way, I get both the retracement and extensions at the same time.

Why are the 0.382, 0.50 and 0.618 important?  These numbers in technical analysis are what we call the golden ratio.  After significant price movement of up or down, the support and resistance levels are often near or at these lines.