wave 3 extension 2.618 (from normally 1.618)The Most Typical Fibonacci Ratios/Multiples within Impulses:
If wave 1 is extended, expect the net of wave 2-5 to be .618 x wave 1
Wave 2 = 618 or .5 x wave 1
If wave 3 is extended, waves 1 and 5 tend toward equality. A .618 relationship is next most likely.
Wave 3 = 1.618 or 2.618 x wave 1
Wave 4 = .382 x wave 3
Wave 4 (net) typically relates to its corresponding wave 2 (net) by a Fibonacci ratio.
Wave 5 = wave 1, or .618, or .382 x the net of waves 1 thru 3.
If neither wave 1 or 3 is extended, expect wave 5 to be 1.618 x the net of 1-3.
The time to complete waves 1 thru 3 = the time to complete the end of 3 to the end of 5.
Extensionimpulsewave
Learn to appreciate fibonacci extension (Example)A solid currency trading strategy consists of entering a trade at the right place, having a stop that is properly calculated, and setting a reasonable profit target level that works time after time after time.
Many newer traders set too ambitious profit targets expecting the trade to be "the big one" and hoping it will help offset the losses they have accumulated.
However, a far more effective currency trading strategy is to set a reasonable profit target each time, not expecting the home run, and being satisfied with smaller profits which on a consistent basis will build the equity in the account surprisingly quickly once the compounding action kicks in.
Here is where the Fibonacci tool comes in.
This article assumes a trader knows how to use the Fibonacci tool which comes as a standard technical analysis tool on most charting software packages.
While the key retracement levels are 38, 50, 62 and 70 percent, two extension levels are commonly used - 1.27 and 1.62 percent.