Fibonacci Retracement

How Fibonacci Retracement is calculated

You anchor the tool to a swing low and a swing high, and it divides that range with horizontal lines at the Fibonacci ratios: 23.6, 38.2, 50, 61.8, and 78.6 percent. The 61.8 percent level, the golden ratio, gets the most attention as a pullback zone.

How Fibonacci Retracement is used

• →Look for pullbacks to stall and reverse near the 38.2, 50, and 61.8 percent levels in a trend.
• →Treat the 61.8 percent area, often called the golden pocket, as a high-interest entry zone with confirmation.
• →Combine the levels with structure, such as a prior support or a moving average sitting at the same price.
• →Use the levels as reference zones, not exact prices, and wait for price action to confirm.

Common mistakes

• ✕Anchoring the tool to the wrong swing, which throws every level off.
• ✕Treating a level as a guaranteed turn instead of a zone that needs confirmation.

Watch: Fibonacci Retracement explained