Ron,
The projection tool could be called a "measured move" or "AB=CD" tool instead.
One starts by drawing three points: A, B, C. That can be done with two or three mouse clicks (two if you drag the mouse while left button is down). Two green lines will be shown, AB and BC. The tool then measures the A-to-B price move, and duplicates it in the same direction starting from C. At the price level that's as far from C, as B is from A, the tool draws a line with a 100% legend. D would be any point on that line. It also draws lines at other common Fibonacci percentages, e.g., 61.8 and 78.6. You can change any of those.
Many people know that by right clicking on a line tool, one can change its properties. But a lot of people DON'T know that you can change default settings for ALL drawing tools, created from that moment onward. The easiest way is to right click on the drawing tool's toolbar button, and edit what you see. (You can do this also from the menu: highlight a chart, then select Drawing / Preferences...)
What amazed me about this tool, once it existed and was showing lines at ratios other than 100%, was how the non-100% lines coincided with lines drawn by retracement tools in the same area. For example, if one identified a large retracement pattern, and drew the projection tool on the first embedded retracement, then a projected ratio such as 127% or 161% might coincide with a significant level on the outer retracement pattern (e.g., the 61.8 or 78.6, or 127). There is a common theme among many web sites devoted to Fibonacci trading: when Fib patterns intersect or interlock, they reinforce each other. Think of each Fib line on a major stock/issue as representing sentiment that believes the level has power as a price magnet or reversal point. When those lines coincide, then the sentiment (read: population of traders) gets stronger. At those places, the likelihood of a reversal or "pause to refresh" increases. Those places are worth watching closely.
You would use this tool together with the retracement tool, looking for places where the important lines coincide or interlock. Some of these patterns have names: Butterfly, Gartley, Bat, Three-Drives. I can post images of this tool and other features; if you have favorite places for sharing charts on the web, please say. |
