Hey folks, been digging deep into combining Fibonacci extensions with Volume Profile lately, and I'm seeing some really interesting confluence. Most of us are familiar with using Fib extensions for potential price targets, but I'm finding that mapping them onto the Volume Profile of a significant move can highlight much more realistic liquidity zones.
The idea is to identify a clear impulse wave, draw the standard Fib extension (e.g., 1.618, 2.618), and then overlay the Volume Profile for that specific price range. What I'm looking for are areas where the Fib extension targets align with high-volume nodes (HVNs) or significant volume imbalances within that profile. These often act as much stronger magnetic points for price than just the raw Fib number alone.
For example, on a recent ETH run-up, the 1.618 Fib extension pointed to $4500. However, the Volume Profile for that move showed a massive HVN at $4350, with a significant gap below it. Price stalled right at the HVN, wicked into the gap, and then reversed. This suggests the liquidity above the HVN was quickly absorbed, and the gap represented a less defended area.
Has anyone else experimented with this? I'm curious about:
- What timeframes you find this most effective on.
- How you deal with situations where Fib targets and HVNs don't align perfectly.
- Any other indicators you combine with this strategy to confirm entries/exits.
I think this method helps filter out some of the noise from pure Fib levels and gives a more data-driven approach to identifying where the smart money might be defending or looking to take profit. Let me know your thoughts!