Courses / Technical Analysis Essentials
Fibonacci Retracements
The golden ratio in trading
Fibonacci retracement levels are based on the golden ratio (1.618) and its derivatives. They predict where price might pull back before continuing the trend.
Key levels: - 23.6%: Shallow retracement (strong trend) - 38.2%: Normal retracement - 50.0%: Median retracement (not technically Fibonacci) - 61.8%: Golden ratio — the most significant level - 78.6%: Deep retracement (last chance before trend change)
How to draw: - In an uptrend: Draw from swing LOW to swing HIGH - In a downtrend: Draw from swing HIGH to swing LOW
Best practice: Combine Fibonacci levels with other confluence factors (support/resistance, moving averages, trend lines) for highest probability trades.
Pro tip: The 61.8% level combined with a daily support level is one of the most reliable entry zones in trading.
Common mistake: Trading every Fibonacci level without other confirmation. Better: Fibonacci alone is not enough. Always combine with S/R, price action, or indicators..
Key takeaways
- 61.8% is the most significant level
- Draw from swing low to high in uptrends
- Combine with other confluence factors
- Use for both entries and targets
Quiz
- The most significant Fibonacci level is: Answer: 61.8%. 61.8% (the golden ratio) is statistically the most significant Fibonacci level.
Educational content, not financial advice.