Fibonacci extension

The tool is anchored on three points: the start of a swing, the end of that swing, and the end of the counter move against it. It measures the first leg, then lays multiples of that length out from the counter move's end, in the direction of the original swing. The multiples used are the ratios above one that the Fibonacci sequence produces, principally the golden ratio, its square root and its square. Chartists treat the resulting lines as conventional objectives, which is a statement about where attention collects rather than about where price is bound to go.

It is the mirror of a Fibonacci retracement, which divides a leg that has already happened. An extension projects past the end of one. Naming is not settled: some platforms and authors call the three point version an expansion and reserve extension for a two point projection, and the two constructions put their lines in different places on the same chart, so a level quoted without its anchors cannot be reproduced.

The thing that most often trips people up is that every level is a function of the three points chosen, and choosing them is discretionary. Two readers marking the same chart on the same timeframe routinely produce different grids, and moving to a higher timeframe produces another set again. Nothing in the mathematics of the sequence transfers to price; the strongest case anyone makes for the tool is that enough participants watch the same proportions for orders to gather near them.