Fibonacci Retracement

Fibonacci retracement levels are horizontal lines that indicate where price might find support or resistance during a pullback.

Key levels

• 23.6%: Shallow retracement, strong trend
• 38.2%: Moderate pullback, trend likely continues
• 50.0%: Not a Fibonacci number but widely watched
• 61.8%: The "golden ratio"—deep pullback, trend still intact
• 78.6%: Very deep pullback, trend may be in question

How to draw them

1. Identify a significant swing low and swing high
2. Apply the Fibonacci tool from low to high (uptrend) or high to low (downtrend)
3. Watch for price reactions at the key levels

Why they work

Fibonacci levels are self-fulfilling to some degree—enough traders watch them that buying/selling clusters at these levels. They are best used as areas of interest rather than exact price points.

Best practices

• Combine with other support/resistance levels for confluence
• Use on higher timeframes for more reliable signals
• Never rely solely on Fibonacci levels for trade entries