Fibonacci Extensions

How traders project possible targets beyond a prior high with the 127.2% and 161.8% extensions, and why targets should guide, not dictate, your exits.

Projecting beyond the high

Retracements measure pullbacks inside a move. Extensions project how far a new move might go beyond the prior high. After a pullback ends, traders measure the size of that pullback and project it upward: the 127.2% and 161.8% extensions are the most common.

One common method: take the swing high and the pullback low. Extension level = pullback low + (high − low) × ratio. A 161.8% extension of a $20 pullback from $100 to $80 is $80 + $20 × 1.618 = about $112.36.

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