Fibonacci Retracement
Fibonacci retracements map pullback levels at 23.6%, 38.2%, 50% and 61.8% of a move, where trends often pause or reverse.
Fibonacci retracements mark 23.6%, 38.2%, 50% and 61.8% of a move, levels where pullbacks often pause or reverse. They work largely because enough traders watch the same numbers.
Fibonacci retracement is a technical tool that draws horizontal levels at 23.6%, 38.2%, 50% and 61.8% of a recent price move. The levels are derived from the Fibonacci sequence ratios and are used to identify where a pullback within a trend may find support or resistance. They work because enough traders watch the same levels to create self-reinforcing reactions, not because of any mathematical magic.
How It Works
- Draw from the start to the end of a swing
- Levels act as support in uptrends and resistance in downtrends
- The 61.8% level is the deepest retracement a trend normally allows
Trading Tips
Use retracements with trend context - they are pullback levels, not standalone signals
A retracement that breaks the 61.8% level usually means the trend is over
Confluence with support/resistance or a moving average beats a bare level
Related Terms
Put Your Knowledge Into Practice
Compare regulated brokers and find the best one for your trading style.