Fibonacci Retracement Basics

Fibonacci retracements apply horizontal levels to a price swing from low to high (uptrend pullback) or high to low (downtrend pullback). The tool calculates ratios from the impulse: 38.2% and 61.8% are the most watched by manual traders.

The premise: markets often retrace a predictable fraction of a move before continuing. Not because magic numbers control price, but because many participants watch the same levels, creating self-reinforcing reactions.

Draw from swing point to swing point of the impulse leg you are trading — not random wicks years apart. The leg should be clear on your timeframe: a visible trend move with a defined start and end before pullback began.

50% is not a true Fibonacci number but is included because half retracements are psychologically and technically common. Treat it as a zone, not a laser line.

Fib levels are probabilistic zones. Price can overshoot to 78.6% or shallow stop at 23.6%. Combine with structure, candlesticks, and volume — never trade a Fib level alone.