Fibonacci retracement is a technical tool that identifies potential support and resistance levels based on the Fibonacci sequence. The key levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
Key Fibonacci Levels
| Level | Significance |
|---|---|
| 23.6% | Shallow retracement |
| 38.2% | Moderate retracement |
| 50.0% | Psychological midpoint |
| 61.8% | Golden ratio — strongest level |
| 78.6% | Deep retracement |
How to Use
- Identify a strong trend move (swing low to swing high)
- Draw Fibonacci tool from low to high (uptrend)
- Look for price to retrace to key levels
- Enter at retracement level with trend direction
Example (Uptrend)
- Swing low: 1.0700
- Swing high: 1.1000 (300 pip move)
- 38.2% retracement: 1.0886
- 61.8% retracement: 1.0815
If price pulls back to 1.0886 and bounces — potential buy entry.
Key Points
- 61.8% (golden ratio) is the most watched level
- Works best in trending markets
- Combine with candlestick patterns at Fib levels
- Use for entry timing, not trend prediction