RiskPicksWhat is Fibonacci Retracement?
Fibonacci retracement is a tool that draws horizontal lines at key ratios derived from the Fibonacci sequence. These levels indicate where price might find support or resistance during a pullback within a trend.
Key levels
- 23.6%: shallow retracement, strong trend
- 38.2%: healthy pullback in a strong trend
- 50%: not technically Fibonacci, but widely watched
- 61.8%: the "golden ratio," most significant level
- 78.6%: deep retracement, last line of defense
How to use it
Draw from the swing low to swing high (uptrend) or swing high to swing low (downtrend). Look for price to bounce at a Fib level, especially when it aligns with other confluence (moving average, order block, previous S/R).