Skip to content

Fibonacci Retracement

Difficulty beginner

Overview

Fibonacci retracement levels are horizontal lines that indicate potential support and resistance based on the Fibonacci sequence.

Key Levels

Level Percentage Significance
0% 0.000 Start of move
23.6% 0.236 Shallow pullback
38.2% 0.382 Common pullback
50% 0.500 Psychological (not Fib)
61.8% 0.618 Golden ratio — most important
78.6% 0.786 Deep retracement
100% 1.000 Full retracement

Extension Levels

Level Percentage Use
127.2% 1.272 First extension target
161.8% 1.618 Golden extension
261.8% 2.618 Second extension

Calculation

Uptrend:
  From Swing Low to Swing High
  Retracement = High - (High - Low) × Fib%

Downtrend:
  From Swing High to Swing Low
  Retracement = Low + (High - Low) × Fib%

where: High swing high anchoring the move · Low swing low anchoring the move · High - Low total magnitude of the impulse leg · Fib% Fibonacci ratio (0.236, 0.382, 0.500, 0.618, 0.786, ...) · Retracement projected price level for that ratio. does: projects horizontal price levels at fixed proportions of a prior impulse to estimate where a pullback may end. Traders draw retracements between the most recent swing extremes and look for entries when price stalls at the 0.382, 0.500, or 0.618 levels — particularly when those align with structural support/resistance, a moving average, or a reversal candle — and use the next-lower Fib level beyond entry for the stop and 0.000/extension levels for targets.

Trading Fibonacci

Confluence

Fibonacci levels are stronger when they align with: - Previous support/resistance - Moving averages - Trendlines - Volume profile nodes - Candlestick reversal patterns

Fibonacci with Elliott Wave

Fibonacci ratios are integral to Elliott Wave analysis: - Wave 2 typically retraces 50-61.8% of Wave 1 - Wave 3 is often 161.8% of Wave 1 - Wave 4 typically retraces 38.2% of Wave 3 - Wave 5 is often equal to Wave 1 or 61.8% of Waves 1-3

Practical Guidelines

  1. 61.8% is Key — Most watched level
  2. Confluence Required — Fib alone is not enough
  3. Zones, Not Lines — Price may overshoot/undershoot
  4. Multiple Swings — Different swing points give different levels
  5. Extensions for Targets — Use for profit targets, not just retracements

Next Steps