Fibonacci Retracement

The Fibonacci sequence starts with 0 and 1, then each subsequent number is the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34...

The Golden Ratio When you divide any Fibonacci number by the one after it, you get approximately 0.618 (61.8%). This 'golden ratio' appears throughout nature and, traders believe, in market movements.

Key Ratios: - 23.6% = shallow retracement - 38.2% = moderate retracement - 50% = half retracement (not a Fib number but commonly used) - 61.8% = golden ratio, deep retracement - 78.6% = very deep retracement

Drawing Retracements: 1. Identify a significant price swing (high to low or low to high) 2. Draw from the start to the end of the swing 3. The tool automatically plots horizontal lines at key levels

In Uptrends: Draw from swing low to swing high. Retracement levels become potential support where buyers may step in.

In Downtrends: Draw from swing high to swing low. Retracement levels become potential resistance where sellers may step in.

Confluence is Key Fibonacci levels are most reliable when they coincide with other factors: prior support/resistance, moving averages, or trendlines.

The 61.8% Level The golden ratio is considered the most significant. A hold here often signals trend continuation; a break suggests deeper correction.

Fibonacci Extensions Beyond 100%, extension levels (127.2%, 161.8%, 261.8%) project potential profit targets for the next move.