Fibonacci Retracement — Complete Reference
Horizontal support/resistance levels at key Fibonacci ratios of a prior price move.
What Fibonacci retracements are
Fibonacci retracements mark potential support or resistance levels at percentages derived from the Fibonacci sequence: 23.6%, 38.2%, 50%, 61.8%, 78.6%. Drawn from a swing high to a swing low (or vice versa).
The key levels (38.2%, 50%, 61.8%)
The 38.2% level catches shallow pullbacks (strong trends). The 50% level is the mid-point of the move — psychologically significant. The 61.8% level (golden ratio) is the deepest 'normal' pullback. Beyond 78.6% usually means the trend is broken.
Why Fib levels work (self-fulfilling)
Fib levels work because many traders watch them. When enough orders cluster at the same price, the level becomes real support/resistance. The math has no special meaning — the collective behavior does.
How to draw Fib retracements
Identify the swing high and swing low you want to measure. Draw from the high to the low for downside retracements; from the low to the high for upside retracements. Levels project where price might pause during the pullback.
Combining with other tools
Fib levels alone are weak. Fib + prior support/resistance + moving averages = confluence. Multiple confluence at one price = stronger reaction expected. Single-indicator Fib trading produces inconsistent results.
Fib extensions for profit targets
After a move retraces and reverses, Fib extensions (127.2%, 161.8%, 200%) project where the next leg may end. Used as profit-taking zones. Same self-fulfilling dynamic — works because traders watch.
Where Fib fails
Choppy, structureless markets. Fib levels need a clear prior move to anchor on. Without that, the levels are arbitrary.
Tools and platforms
Every major charting platform has Fib retracement tools. TradingView's is the most popular. Use it to mark levels, then trade structure-based setups at those levels.