Fibonacci Retracement
Horizontal levels drawn at set percentages of a prior move, used to anticipate pullback depth.
Also called: fib · fibs · retracement levels
In plain language
The tool is anchored to a swing low and swing high, then draws lines at 23.6%, 38.2%, 50%, 61.8% and 78.6% of that range.
The levels have no mechanical force. They matter to the extent that many participants watch the same ones and place orders there.
Anchoring is subjective, and different anchor choices produce entirely different levels — which is why fib levels are strongest when they coincide with structure that already existed.
Why it matters
Retracement levels give a pullback entry a specific price to plan around, which turns a vague "wait for a dip" into a stop distance you can size from.
Common mistakes
- Re-anchoring the tool until the levels agree with a position already held.
- Treating a level as support with no confirming price behavior.
- Placing stops exactly at a fib level, where probes are common.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
A temporary move against the prevailing trend before it resumes.
A price area where buying has repeatedly been strong enough to stop a decline.
A price area where selling has repeatedly been strong enough to stop an advance.
A peak with lower highs on both sides — a local turning point in price.
A trough with higher lows on both sides — a local turning point where buyers took control.