Fibonacci extensions: setting targets with 127.2%, 161.8% and 261.8%

Most traders spend lots of time finding entries and almost none planning exits. The result: they close winners too early or hold them until profit turns into loss. Fibonacci extensions give a more logical answer.

Extension levels

Level	Use
100%	A move equal to the previous swing (measured move)
127.2%	Conservative first target
161.8%	Main target; the most used level
261.8%	Target for very strong trends

The three-point method

The trend-based Fib extension tool on MetaTrader and TradingView needs three points:

1. A: start of the first swing (a low)
2. B: end of the first swing (a high)
3. C: end of the pullback (a higher low)

The levels are projected from point C in the direction of the trend.

The simpler two-point method

On the same retracement you drew for your entry, enable the levels above 100% such as 127.2% and 161.8%. They show how far price may travel if it breaks the previous high.

Scaling out

We usually take profit in steps:

• part at 127.2%, moving the stop to breakeven
• the main portion at 161.8%
• the rest with a trailing stop for big moves

This locks in profit without giving up the chance of catching a large move.

Confluence with other levels

When 161.8% lines up with old resistance, a round number or a higher-timeframe high, a reaction there becomes far more likely.

An important note

An extension is a probability, not a certainty. If market structure changes before the target, for example a CHoCH against your trade, do not wait for the target.

📘 This article summarises ideas from our book "Fibonacci Chart Strategy", with 22 chapters and 137 real before-and-after examples. To get the book, message us on Telegram @fibonacci_chart.

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Trading financial markets involves risk. This article is educational and is not investment advice.