Fibonacci Retracement

Fibonacci retracement is a charting tool that divides a completed price move into standard fractions, 23.6%, 38.2%, 50%, 61.8%, and 78.6%, to project where a pullback might stall. The trader anchors the tool to the swing low and swing high, and the levels print as horizontal lines inside that range.

The ratios derive from relationships in the Fibonacci sequence, except the 50% level, which is not a Fibonacci ratio at all but is included on every platform because half-back retracements are common. Whether the math carries any inherent market meaning is doubtful; the more defensible explanation is reflexivity. Enough traders draw the same levels from the same obvious swings that orders cluster there, which is also why levels drawn from ambiguous swing points work worse.

In practice the 38.2%-61.8% zone gets treated as the normal pullback depth in a healthy trend, and a retracement blowing through 78.6% is usually read as the old move being fully unwound rather than corrected.