Fibonacci Retracement

Fibonacci Retracement is a popular technical analysis tool used by traders. It helps identify potential support and resistance levels in a market. It is based on the Fibonacci sequence, a series of numbers where each number is the sum of the two before it. In trading, key Fibonacci levels—23.6%, 38.2%, 50%, 61.8%, and 78.6%—are drawn on a chart. These levels predict where price might pause or reverse during a retracement of a larger move.

To apply Fibonacci retracement, traders draw the tool from a recent high to a recent low (in a downtrend), or from a low to a high (in an uptrend). The resulting lines help highlight areas where price could pull back before continuing in the direction of the original trend. While not a guaranteed predictor, Fibonacci retracement levels are widely used. They work alongside other indicators to strengthen trade decisions and spot entry or exit points.

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