Fibonacci Extension
Elliott Wave Theory glossary · Fibonacci Price & Time Projections
Definition
A price projection technique that measures the expected length of a subsequent impulse wave as a Fibonacci multiple of a prior impulse wave.
Fibonacci Extension in plain English
Markets tend to move in proportions tied to special numbers (the Fibonacci ratios, like 1.618), and a Fibonacci Extension uses that to guess how FAR the next big move will travel. You take the size of a prior push and multiply it by a Fibonacci number to project a target — for example, if one up-leg was 100 points, a common projection for the next leg might be about 1.618 × 100 = 162 points. It's basically an educated ruler for saying 'the trend will probably run to about here before it runs out of steam,' giving traders a spot to watch for taking profits.
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