Forex glossary
Fibonacci Retracement
Fibonacci retracements divide a selected move into percentage levels used as possible pullback zones. Common ratios include 23.6%, 38.2%, 61.8% and 78.6%; 50% is often added despite not being a Fibonacci ratio. The plotted levels do not guarantee support, resistance or trend resumption.
Illustrative example
How does it work in practice?
Assume price rises from 100 to 120 on a linear scale. A 61.8% retracement measured down from the peak is 107.64; changing the chosen endpoints changes the resulting zone.
A case to work through
Retracing a decline
Hypothetically, price falls from 150 to 130; the correction retraces 61.8% of that move.
- The decline spans 20, so the correction spans 12.36.
- Adding that to the decline's endpoint gives 142.36.
What follows? Mark 142.36 while keeping the chosen anchors.
Example boundary: A move percentage is neither a return from the initial price nor a guaranteed reaction.
Retracement anchors
Text description of the diagram
- Selected move: Record the leg's start, end and direction.
- Correction distance: Measure the giveback from that leg's endpoint.
- Move percentage: Divide correction by the selected move's length.
A useful distinction
Fibonacci Retracement / Fibonacci Extension
Retracement locates correction levels; extension projects a leg beyond a selected anchor.
Change an assumption, see the result
What changes if…?
Change the start, end and current price to measure how much of the move has been retraced. The result is not a return or entry signal.
Retracement = (end − current price) ÷ (end − start) × 100%. The formula works for rising and falling moves. A negative value means continuation beyond the end; over 100% means passing the start. Selected anchors are assumptions, not a trading signal.
Check your understanding
Locate a 61.8% correction of a downward leg.
Show the answer and explanation
90
The decline spans 20 units. A half retracement adds 10 to its low: 80 + 0.5 × 20 = 90. This is a geometric level, not a guaranteed reversal.
Anchors, ratios and rules
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Related terms
Sources and documentation
- TradingView – Fibonacci retracements
Two-point anchors and percentage retracement levels; level calculations do not establish outcomes.
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