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7Grade 7: Price Action Lab
Technical Analysis + Price Action · Fibonacci Retracement

Extension levels: projecting where price might go

Use Fibonacci extension levels to project targets beyond the previous swing high or low.

3 min read+25 XPLesson 53 of 96
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Technical Analysis + Price Action

Fibonacci Retracement

Lesson 53 of 9655%
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Lesson 53 of 96Technical Analysis + Price ActionFibonacci Retracement

Today's tiny win: make one idea click.

Use Fibonacci extension levels to project targets beyond the previous swing high or low.

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Where price might go next

Retracements tell you where a pullback might stop. Extensions tell you where the next leg might end. Same Fibonacci math, applied forward instead of backward. After price retraces to a level like 61.8% and then continues in the original trend, traders use extensions to project where that continuation might pause for profit-taking.

Wick points at a chalkboard listing 127.2% as modest, 161.8% as most common and 261.8% for strong trends, showing the three extension levels traders watch.Extension targets127.2%: modest161.8%: most common261.8%: strong trend
Wick saysExtensions guess where the next leg may pause: 127.2%, 161.8% and 261.8%.

The most-watched extension levels are 127.2%, 161.8%, and 261.8%. 127.2% is a modest extension — price has moved 27% beyond the previous swing high. 161.8% — the golden ratio applied forward — is the most common profit target. 261.8% is a powerful trend's stretch target, reached only when momentum is strong and the move has room to run.

Drawing extensions is similar to drawing retracements. Most charting tools include extensions in the same Fib menu — TradingView's tool draws them automatically if you check the 127.2 and 161.8 boxes. Anchor to your swing low and swing high (in an uptrend), and the tool projects the extension levels above your swing high. In a downtrend, levels project below the swing low.

Wick shows a green card saying use extensions as places to exit and a coral card saying start a new trade at an extension, teaching that extensions are exit zones.Do thisUse extensions asplaces to exitNot thisStart a new tradeat an extension
Wick saysExtensions are targets, not entries, because others take profit there too.

A clean way to use extensions: scale out. Take partial profit at 127.2%, take more at 161.8%, let the rest ride toward 261.8% with a trailing stop. This way you lock in profits at high-probability pauses without giving up on a powerful trend. The opposite — going all-in at 127.2% and exiting completely — leaves a lot of move on the table when extensions get tagged.

Wick climbs three steps labeled part out at 127.2%, more at 161.8% and trail to 261.8%, showing how to exit a trade in pieces at the extension levels.1Part out at127.2%2More at161.8%3Trail to261.8%
Wick saysScale out in steps at each extension instead of leaving all at once.

Recap: extensions project where continuation might pause. 127.2%, 161.8%, 261.8% are the three big ones. They're targets, not entries. Scale out at extensions, don't enter there.

Knowledge check

Answer before moving on.

0 / 3 answered

1. Price ran from $100 to $120, then pulled back. After the pullback, it resumed the uptrend. Where does the 161.8% extension target sit?

2. Should you use extensions as entry signals?

3. Which extension level corresponds to the golden ratio?

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