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Calculated Shard: 148 (from laksa112)

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curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/f/fibonacciretracement.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/f/fibonacciretracement.asp\'))) FORMAT JSONEachRow'

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{"found_url":"https:\/\/www.investopedia.com\/terms\/f\/fibonacciretracement.asp","crawl_time":1776032265,"first_indexed_time":1510376527,"http_code":200,"src_unparsed":"com,investopedia!www,\/terms\/f\/fibonacciretracement.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"What Are Fibonacci Retracement Levels, and What Do They Tell You?","meta_descriptions":["Learn about Fibonacci retracement levels, how traders use them to spot support and resistance, and what they reveal about market trends and price pullbacks."],"attrs_boilerpipe_text":"Key Takeaways\nFibonacci retracement levels, derived from the Fibonacci sequence, are used to identify potential support and resistance levels.\nKey percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.\n1\nTraders use these levels to place entry orders, set stop-loss levels, and determine price targets. The popular technical indicator can be found on popular\nonline brokerage platforms\n.\nFibonacci retracement levels are often used with other technical analysis tools to improve trading strategies.\nRisks include the potential for false signals and the need for additional confirmation.\nFibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading \nonline brokerage and trading platforms\n and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below.\nUnderstanding Fibonacci Retracement Levels\nFibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages.\n1\nHistorical Background\nThe Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, \"Liber Abaci,\" popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system.\n2\nBeyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the\ngolden ratio\n, which appears in everything from plant growth to technical analysis.\nHow Fibonacci Retracement Levels Work\nTo apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows?\nOnce the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions.\nShallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets.\nFast Fact\nThe golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA.\nApplications in Trading\nIn trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals.\nIn an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or \nrelative strength index\n indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades.\nTo manage risk, traders place\nstop-loss orders\njust beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals.\nFibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%.\n3\nExample\nES1! Fib Retracement Part I.\nTradingview\nThe image above illustrates S&P 500 e-mini\nfutures\ntraded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement.\nRetracement levels are calculated as follows:\nRetracement Level - Pivot High - (Retracement Percentage × Price Range)\nwith\nPrice Range = Pivot High - Pivot Low\nFor example, the 61.8% retracement level in this case would be as follows:\nPrice Range = 6,162.25 - 5,809 = 353.25\n61.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00\nIn this situation, a trader bullish on S&P 500 e-mini\nfutures\nis looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security.\nThe security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high.\nES1! Fib Retracement Part II.\nTradingview\nAfter some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The\ntrader\nexits with a small profit.\nUsing With Other Technical Analysis Tools\nIn many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory.\nThe\nGartley pattern\n, a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking.\n4\nElliot Wave theory\nuses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C.\n5\nBy integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the\nMoving Average Convergence Divergence\n(MACD) and the\nRelative Strength Index\n(RSI), traders can achieve a more structured, rule-based approach to market analysis and trading.\nImportant\nMarket trends are more accurately identified when other analysis tools are used with the Fibonacci approach.\nLimitations and Further Considerations\nWhile Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels.\nFibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments.\nThere is the potential for\nfalse signals\nand breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion.\n6\nThere is also\nconfirmation bias\ninvolved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea.\nCommon Criticisms\nMany argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether \nsupport or resistance\nwill hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior.\nThe most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels.\nIn addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions.\nPros and Cons of Fibonacci Retracement Levels\nPros\nIdentifies support and resistance levels\nWorks well in trending markets\nRobust risk management tool\nCan be used with other technical analysis tools\nWorks across multiple time frames\nCons\nCan be confusing\nNo predictive power on its own\nHighly subjective\nProne to false signals\nMarket conditions affect effectiveness\nThe Bottom Line\nOverall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/terms\/f\/fibonacciretracement.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/terms\/f\/fibonacciretracement.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - 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She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n![Fibonacci retracement levels visualized on a stock chart with labeled horizontal lines indicating support and resistance](https:\/\/www.investopedia.com\/thmb\/61Qc-PEfRABd4yuxhv9Sx0u4l4Q=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/fibonacciretracement-11f22406636143cbb239331bae819394.png)\n\n![Fibonacci retracement levels visualized on a stock chart with labeled horizontal lines indicating support and resistance](https:\/\/www.investopedia.com\/thmb\/61Qc-PEfRABd4yuxhv9Sx0u4l4Q=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/fibonacciretracement-11f22406636143cbb239331bae819394.png)\n\nFibonacci retracement levels became widely used with computerized trading, which allowed them to be easily plotted.\n\nKatie Kerpel \/ Investopedia\n\nClose\n\nDefinition\n\nFibonacci retracement levels are used by traders to help them find key price levels and zones where a security might stall, reverse, or continue moving within a trend. They are based on the Fibonacci sequence.\n\n### Key Takeaways\n- Fibonacci retracement levels, derived from the Fibonacci sequence, are used to identify potential support and resistance levels.\n- Key percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.1\n- Traders use these levels to place entry orders, set stop-loss levels, and determine price targets. The popular technical indicator can be found on popular [online brokerage platforms](https:\/\/www.investopedia.com\/best-online-brokers-4587872).\n- Fibonacci retracement levels are often used with other technical analysis tools to improve trading strategies.\n- Risks include the potential for false signals and the need for additional confirmation.\n\nFibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading [online brokerage and trading platforms](https:\/\/www.investopedia.com\/best-online-brokers-4587872) and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below.\n\n## Understanding Fibonacci Retracement Levels\nFibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages.1\n\n### Historical Background\nThe Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, \"Liber Abaci,\" popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system.2\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nBeyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the [golden ratio](https:\/\/www.investopedia.com\/articles\/technical\/04\/033104.asp), which appears in everything from plant growth to technical analysis.\n\n## How Fibonacci Retracement Levels Work\nTo apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows?\n\nOnce the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions.\n\nShallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets.\n\n### Fast Fact\nThe golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA.\n## Applications in Trading\nIn trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals.\n\nIn an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or [relative strength index](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades.\n\nTo manage risk, traders place [stop-loss orders](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp) just beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals.\n\nFibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%.3\n\n### Example\n![A stock chart showing Fibonacci retracement levels with annotations including entry point pivot high and stop loss details](https:\/\/www.investopedia.com\/thmb\/pXeUyVsoPBuPlPaqC9qhftFI_H0=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/ES1_2025-02-11_16-31-09_1-8283a1be24da4276a7d2046abae547ec.png)\n\n![A stock chart showing Fibonacci retracement levels with annotations including entry point pivot high and stop loss details](https:\/\/www.investopedia.com\/thmb\/pXeUyVsoPBuPlPaqC9qhftFI_H0=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/ES1_2025-02-11_16-31-09_1-8283a1be24da4276a7d2046abae547ec.png)\n\nES1! Fib Retracement Part I.\n\nTradingview\n\nThe image above illustrates S\\&P 500 e-mini [futures](https:\/\/www.investopedia.com\/the-best-futures-trading-platforms-8774357) traded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement.\n\nRetracement levels are calculated as follows:\n\n- Retracement Level - Pivot High - (Retracement Percentage × Price Range)\n\nwith\n\n- Price Range = Pivot High - Pivot Low\n\nFor example, the 61.8% retracement level in this case would be as follows:\n\nPrice Range = 6,162.25 - 5,809 = 353.25\n\n- 61\\.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00\n\nIn this situation, a trader bullish on S\\&P 500 e-mini [futures](https:\/\/www.investopedia.com\/the-best-futures-trading-platforms-8774357) is looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security.\n\nThe security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high.\n\n![Stock chart with annotations Long Entry Failed to Return to Pivot High and Exited with Small Profit indicating a trading scenario](https:\/\/www.investopedia.com\/thmb\/-eVDNHO7h4me32SjbGueA7Cpm-Y=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/ES1_2025-02-11_16-38-28_2-2884ae07d63b4be495a13088d17b2d3d.png)\n\n![Stock chart with annotations Long Entry Failed to Return to Pivot High and Exited with Small Profit indicating a trading scenario](https:\/\/www.investopedia.com\/thmb\/-eVDNHO7h4me32SjbGueA7Cpm-Y=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/ES1_2025-02-11_16-38-28_2-2884ae07d63b4be495a13088d17b2d3d.png)\n\nES1! Fib Retracement Part II.\n\nTradingview\n\nAfter some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The [trader](https:\/\/www.investopedia.com\/the-best-brokers-for-day-trading-8762913) exits with a small profit.\n\n### Using With Other Technical Analysis Tools\nIn many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory.\n\nThe [Gartley pattern](https:\/\/www.investopedia.com\/terms\/g\/gartley.asp), a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking.4\n\n[Elliot Wave theory](https:\/\/www.investopedia.com\/terms\/e\/elliottwavetheory.asp) uses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C.5\n\nBy integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the [Moving Average Convergence Divergence](https:\/\/www.investopedia.com\/terms\/m\/macd.asp) (MACD) and the [Relative Strength Index](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) (RSI), traders can achieve a more structured, rule-based approach to market analysis and trading.\n\n### Important\nMarket trends are more accurately identified when other analysis tools are used with the Fibonacci approach.\n## Limitations and Further Considerations\nWhile Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels.\n\nFibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments.\n\nThere is the potential for [false signals](https:\/\/www.investopedia.com\/terms\/f\/false-signal.asp) and breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion.6\n\nThere is also [confirmation bias](https:\/\/www.investopedia.com\/terms\/c\/confirmation-bias.asp) involved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea.\n\n### Common Criticisms\nMany argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether [support or resistance](https:\/\/www.investopedia.com\/trading\/support-and-resistance-basics\/) will hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior.\n\nThe most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels.\n\nIn addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions.\n\n## Pros and Cons of Fibonacci Retracement Levels\nPros\n\n- Identifies support and resistance levels\n- Works well in trending markets\n- Robust risk management tool\n- Can be used with other technical analysis tools\n- Works across multiple time frames\n\nCons\n\n- Can be confusing\n- No predictive power on its own\n- Highly subjective\n- Prone to false signals\n- Market conditions affect effectiveness\n## The Bottom Line\nOverall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals.\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. Fidelity. \"[Fibonacci Retracement](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/technical-analysis\/technical-indicator-guide\/fibonacci-retracement).\"\n2. K. K. Tung. \"[Fibonacci Numbers, the Golden Ratio, and Laws of Nature?](https:\/\/assets.press.princeton.edu\/chapters\/s8446.pdf),\" Pages 1-6. *Topics in Mathematical Modeling*. Princeton University Press, 2007.\n3. The Trading Analyst. \"[What are Fibonacci Extensions?](https:\/\/thetradinganalyst.com\/fibonacci-extensions\/)\"\n4. Harmonic Trader. \"[The Gartley Pattern](https:\/\/harmonictrader.com\/harmonic-patterns\/gartley-pattern\/).\"\n5. Elliot Wave International. \"[Fibonacci Relationships](https:\/\/www.elliottwave.com\/waveopedia\/fibonacci-relationships\/).\"\n6. Quant Institute. \"[Fibonacci Retracement: Trading Strategy, Python Implementation and More](https:\/\/blog.quantinsti.com\/fibonacci-retracement-trading-strategy-python\/).\"\n\nCompare Accounts\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nRead more\n\n- [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n- [Technical Analysis](https:\/\/www.investopedia.com\/technical-analysis-4689657)\n- [Technical Analysis Basic Education](https:\/\/www.investopedia.com\/technical-analysis-basic-education-4689655)\n\nPartner Links\n\n## Related Articles\n[![Photo and illustration composite of two people reviewing an investment portfolio on a tablet. ](https:\/\/www.investopedia.com\/thmb\/fKzQRMTSyllcC5TEESrj-9NFT74=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/SmartBetaExplanationStrategyandExamples_final-d3ef4394038f4a4085191b890421caaa.png) ![Photo and illustration composite of two people reviewing an investment portfolio on a tablet. 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trader points to a screen displaying trade volumes rising and falling.](https:\/\/www.investopedia.com\/thmb\/a4_KMdAakaJlnrz2G65b1wBEi4o=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/TradeVolumeIndex-d97dcddc6d5e4821a2f8ecde1267e5dc.jpg) What Is the Trade Volume Index (TVI)?](https:\/\/www.investopedia.com\/terms\/t\/tradevolumeindex.asp)\n\n[![A candlestick chart showing price movement superimposed over a trader making trades on their laptop.](https:\/\/www.investopedia.com\/thmb\/uHYUL5rXTaGuFGag1iGDGohT00I=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/WhiteCandlestick-07c8fe394a954a3a804717e753d585f0.jpg) ![A candlestick chart showing price movement superimposed over a trader making trades on their laptop.](https:\/\/www.investopedia.com\/thmb\/uHYUL5rXTaGuFGag1iGDGohT00I=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/WhiteCandlestick-07c8fe394a954a3a804717e753d585f0.jpg) White Candlestick 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Indicator](https:\/\/www.investopedia.com\/terms\/t\/trix.asp)\n\n[![](https:\/\/www.investopedia.com\/thmb\/_m6PKK6uYHB2j1F0OmgGEe5Poo4=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/activetrading10-5bfc2b9c46e0fb0083c07dfa.jpg) ![](https:\/\/www.investopedia.com\/thmb\/_m6PKK6uYHB2j1F0OmgGEe5Poo4=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/activetrading10-5bfc2b9c46e0fb0083c07dfa.jpg) The Role of Amplitude in Securities Pricing](https:\/\/www.investopedia.com\/terms\/a\/amplitude.asp)\n\n[![stock market](https:\/\/www.investopedia.com\/thmb\/cw6MTh7vw3lNYFfHwVmP_tEAnRo=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/stock-market-836258860-b02336942c2b4590a42bfbeb1f2ab806.jpg) ![stock market](https:\/\/www.investopedia.com\/thmb\/cw6MTh7vw3lNYFfHwVmP_tEAnRo=\/282x188\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/stock-market-836258860-b02336942c2b4590a42bfbeb1f2ab806.jpg) What Is the Cumulative Volume Index (CVI)? 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The popular technical indicator can be found on popular [online brokerage platforms](https:\/\/www.investopedia.com\/best-online-brokers-4587872).\n- Fibonacci retracement levels are often used with other technical analysis tools to improve trading strategies.\n- Risks include the potential for false signals and the need for additional confirmation.\n\nFibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading [online brokerage and trading platforms](https:\/\/www.investopedia.com\/best-online-brokers-4587872) and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below.\n\n## Understanding Fibonacci Retracement Levels\nFibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages.1\n\n### Historical Background\nThe Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, \"Liber Abaci,\" popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system.2\n\nBeyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the [golden ratio](https:\/\/www.investopedia.com\/articles\/technical\/04\/033104.asp), which appears in everything from plant growth to technical analysis.\n\n## How Fibonacci Retracement Levels Work\nTo apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows?\n\nOnce the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions.\n\nShallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets.\n\n### Fast Fact\nThe golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA.\n## Applications in Trading\nIn trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals.\n\nIn an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or [relative strength index](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades.\n\nTo manage risk, traders place [stop-loss orders](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp) just beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals.\n\nFibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%.3\n\n### Example\nES1! Fib Retracement Part I.\n\nTradingview\n\nThe image above illustrates S\\&P 500 e-mini [futures](https:\/\/www.investopedia.com\/the-best-futures-trading-platforms-8774357) traded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement.\n\nRetracement levels are calculated as follows:\n\n- Retracement Level - Pivot High - (Retracement Percentage × Price Range)\n\nwith\n\n- Price Range = Pivot High - Pivot Low\n\nFor example, the 61.8% retracement level in this case would be as follows:\n\nPrice Range = 6,162.25 - 5,809 = 353.25\n\n- 61\\.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00\n\nIn this situation, a trader bullish on S\\&P 500 e-mini [futures](https:\/\/www.investopedia.com\/the-best-futures-trading-platforms-8774357) is looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security.\n\nThe security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high.\n\nES1! Fib Retracement Part II.\n\nTradingview\n\nAfter some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The [trader](https:\/\/www.investopedia.com\/the-best-brokers-for-day-trading-8762913) exits with a small profit.\n\n### Using With Other Technical Analysis Tools\nIn many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory.\n\nThe [Gartley pattern](https:\/\/www.investopedia.com\/terms\/g\/gartley.asp), a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking.4\n\n[Elliot Wave theory](https:\/\/www.investopedia.com\/terms\/e\/elliottwavetheory.asp) uses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C.5\n\nBy integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the [Moving Average Convergence Divergence](https:\/\/www.investopedia.com\/terms\/m\/macd.asp) (MACD) and the [Relative Strength Index](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) (RSI), traders can achieve a more structured, rule-based approach to market analysis and trading.\n\n### Important\nMarket trends are more accurately identified when other analysis tools are used with the Fibonacci approach.\n## Limitations and Further Considerations\nWhile Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels.\n\nFibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments.\n\nThere is the potential for [false signals](https:\/\/www.investopedia.com\/terms\/f\/false-signal.asp) and breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion.6\n\nThere is also [confirmation bias](https:\/\/www.investopedia.com\/terms\/c\/confirmation-bias.asp) involved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea.\n\n### Common Criticisms\nMany argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether [support or resistance](https:\/\/www.investopedia.com\/trading\/support-and-resistance-basics\/) will hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior.\n\nThe most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels.\n\nIn addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions.\n\n## Pros and Cons of Fibonacci Retracement Levels\nPros\n\n- Identifies support and resistance levels\n- Works well in trending markets\n- Robust risk management tool\n- Can be used with other technical analysis tools\n- Works across multiple time frames\n\nCons\n\n- Can be confusing\n- No predictive power on its own\n- Highly subjective\n- Prone to false signals\n- Market conditions affect effectiveness\n## The Bottom Line\nOverall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals.","meta_canonical":null}

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Boilerpipe Text	Key Takeaways Fibonacci retracement levels, derived from the Fibonacci sequence, are used to identify potential support and resistance levels. Key percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%. 1 Traders use these levels to place entry orders, set stop-loss levels, and determine price targets. The popular technical indicator can be found on popular online brokerage platforms . Fibonacci retracement levels are often used with other technical analysis tools to improve trading strategies. Risks include the potential for false signals and the need for additional confirmation. Fibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading online brokerage and trading platforms and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below. Understanding Fibonacci Retracement Levels Fibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages. 1 Historical Background The Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, "Liber Abaci," popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system. 2 Beyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the golden ratio , which appears in everything from plant growth to technical analysis. How Fibonacci Retracement Levels Work To apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows? Once the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions. Shallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets. Fast Fact The golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA. Applications in Trading In trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals. In an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or relative strength index indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades. To manage risk, traders place stop-loss orders just beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals. Fibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%. 3 Example ES1! Fib Retracement Part I. Tradingview The image above illustrates S&P 500 e-mini futures traded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement. Retracement levels are calculated as follows: Retracement Level - Pivot High - (Retracement Percentage × Price Range) with Price Range = Pivot High - Pivot Low For example, the 61.8% retracement level in this case would be as follows: Price Range = 6,162.25 - 5,809 = 353.25 61.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00 In this situation, a trader bullish on S&P 500 e-mini futures is looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security. The security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high. ES1! Fib Retracement Part II. Tradingview After some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The trader exits with a small profit. Using With Other Technical Analysis Tools In many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory. The Gartley pattern , a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking. 4 Elliot Wave theory uses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C. 5 By integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI), traders can achieve a more structured, rule-based approach to market analysis and trading. Important Market trends are more accurately identified when other analysis tools are used with the Fibonacci approach. Limitations and Further Considerations While Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels. Fibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments. There is the potential for false signals and breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion. 6 There is also confirmation bias involved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea. Common Criticisms Many argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether support or resistance will hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior. The most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels. In addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions. Pros and Cons of Fibonacci Retracement Levels Pros Identifies support and resistance levels Works well in trending markets Robust risk management tool Can be used with other technical analysis tools Works across multiple time frames Cons Can be confusing No predictive power on its own Highly subjective Prone to false signals Market conditions affect effectiveness The Bottom Line Overall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals.
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[Warren Buffett's Investing Rule That Could Change Your Future](https://www.investopedia.com/warren-buffett-s-investing-rule-that-could-change-your-financial-future-11947169) Table of Contents Expand Table of Contents - [Fibonacci Retracement Levels](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-understanding-fibonacci-retracement-levels) - [Ancient Origins](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-how-fibonacci-retracement-levels-work) - [Formula](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-applications-in-trading) - [What Do They Tell You?](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-limitations-and-further-considerations) - [Pros and Cons of Fibonacci Retracement Levels](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-pros-and-cons-of-fibonacci-retracement-levels) - [The Bottom Line](https://www.investopedia.com/terms/f/fibonacciretracement.asp#toc-the-bottom-line) # What Are Fibonacci Retracement Levels, and What Do They Tell You? By [Cedric Thompson](https://www.investopedia.com/cedric-thompson-6891417) ![Profile Picture]() ![Profile Picture](https://www.investopedia.com/thmb/5vICauAiCyxNeYM1qelhLOx7NrE=/200x200/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/WhatsAppImage2023-01-27at15.28.11-ab485076e611401ca7e1b390ba1e3b3e.jpeg) [Full Bio](https://www.investopedia.com/cedric-thompson-6891417) Cedric Thompson is a pioneer of Technical Analysis in the English-speaking Caribbean and an Investment Management Strategist at the Trinidad and Tobago Unit Trust Corporation Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated December 23, 2025 Fact checked by [Vikki Velasquez](https://www.investopedia.com/vikki-velasquez-5198872) ![Vikkie Velasquez]() ![Vikkie Velasquez](https://www.investopedia.com/thmb/qsiqwN4603qvBBcEmwBBFAZ7h-8=/200x200/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg) Fact checked by Vikki Velasquez [Full Bio](https://www.investopedia.com/vikki-velasquez-5198872) Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ![Fibonacci retracement levels visualized on a stock chart with labeled horizontal lines indicating support and resistance](https://www.investopedia.com/thmb/61Qc-PEfRABd4yuxhv9Sx0u4l4Q=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/fibonacciretracement-11f22406636143cbb239331bae819394.png) ![Fibonacci retracement levels visualized on a stock chart with labeled horizontal lines indicating support and resistance](https://www.investopedia.com/thmb/61Qc-PEfRABd4yuxhv9Sx0u4l4Q=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/fibonacciretracement-11f22406636143cbb239331bae819394.png) Fibonacci retracement levels became widely used with computerized trading, which allowed them to be easily plotted. Katie Kerpel / Investopedia Close Definition Fibonacci retracement levels are used by traders to help them find key price levels and zones where a security might stall, reverse, or continue moving within a trend. They are based on the Fibonacci sequence. ### Key Takeaways - Fibonacci retracement levels, derived from the Fibonacci sequence, are used to identify potential support and resistance levels. - Key percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.1 - Traders use these levels to place entry orders, set stop-loss levels, and determine price targets. The popular technical indicator can be found on popular [online brokerage platforms](https://www.investopedia.com/best-online-brokers-4587872). - Fibonacci retracement levels are often used with other technical analysis tools to improve trading strategies. - Risks include the potential for false signals and the need for additional confirmation. Fibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading [online brokerage and trading platforms](https://www.investopedia.com/best-online-brokers-4587872) and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below. ## Understanding Fibonacci Retracement Levels Fibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages.1 ### Historical Background The Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, "Liber Abaci," popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system.2 Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Beyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the [golden ratio](https://www.investopedia.com/articles/technical/04/033104.asp), which appears in everything from plant growth to technical analysis. ## How Fibonacci Retracement Levels Work To apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows? Once the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions. Shallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets. ### Fast Fact The golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA. ## Applications in Trading In trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals. In an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or [relative strength index](https://www.investopedia.com/terms/r/rsi.asp) indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades. To manage risk, traders place [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp) just beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals. Fibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%.3 ### Example ![A stock chart showing Fibonacci retracement levels with annotations including entry point pivot high and stop loss details](https://www.investopedia.com/thmb/pXeUyVsoPBuPlPaqC9qhftFI_H0=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/ES1_2025-02-11_16-31-09_1-8283a1be24da4276a7d2046abae547ec.png) ![A stock chart showing Fibonacci retracement levels with annotations including entry point pivot high and stop loss details](https://www.investopedia.com/thmb/pXeUyVsoPBuPlPaqC9qhftFI_H0=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/ES1_2025-02-11_16-31-09_1-8283a1be24da4276a7d2046abae547ec.png) ES1! Fib Retracement Part I. Tradingview The image above illustrates S\&P 500 e-mini [futures](https://www.investopedia.com/the-best-futures-trading-platforms-8774357) traded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement. Retracement levels are calculated as follows: - Retracement Level - Pivot High - (Retracement Percentage × Price Range) with - Price Range = Pivot High - Pivot Low For example, the 61.8% retracement level in this case would be as follows: Price Range = 6,162.25 - 5,809 = 353.25 - 61\.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00 In this situation, a trader bullish on S\&P 500 e-mini [futures](https://www.investopedia.com/the-best-futures-trading-platforms-8774357) is looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security. The security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high. ![Stock chart with annotations Long Entry Failed to Return to Pivot High and Exited with Small Profit indicating a trading scenario](https://www.investopedia.com/thmb/-eVDNHO7h4me32SjbGueA7Cpm-Y=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/ES1_2025-02-11_16-38-28_2-2884ae07d63b4be495a13088d17b2d3d.png) ![Stock chart with annotations Long Entry Failed to Return to Pivot High and Exited with Small Profit indicating a trading scenario](https://www.investopedia.com/thmb/-eVDNHO7h4me32SjbGueA7Cpm-Y=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/ES1_2025-02-11_16-38-28_2-2884ae07d63b4be495a13088d17b2d3d.png) ES1! Fib Retracement Part II. Tradingview After some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The [trader](https://www.investopedia.com/the-best-brokers-for-day-trading-8762913) exits with a small profit. ### Using With Other Technical Analysis Tools In many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory. The [Gartley pattern](https://www.investopedia.com/terms/g/gartley.asp), a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking.4 [Elliot Wave theory](https://www.investopedia.com/terms/e/elliottwavetheory.asp) uses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C.5 By integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the [Moving Average Convergence Divergence](https://www.investopedia.com/terms/m/macd.asp) (MACD) and the [Relative Strength Index](https://www.investopedia.com/terms/r/rsi.asp) (RSI), traders can achieve a more structured, rule-based approach to market analysis and trading. ### Important Market trends are more accurately identified when other analysis tools are used with the Fibonacci approach. ## Limitations and Further Considerations While Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels. Fibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments. There is the potential for [false signals](https://www.investopedia.com/terms/f/false-signal.asp) and breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion.6 There is also [confirmation bias](https://www.investopedia.com/terms/c/confirmation-bias.asp) involved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea. ### Common Criticisms Many argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether [support or resistance](https://www.investopedia.com/trading/support-and-resistance-basics/) will hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior. The most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels. In addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions. ## Pros and Cons of Fibonacci Retracement Levels Pros - Identifies support and resistance levels - Works well in trending markets - Robust risk management tool - Can be used with other technical analysis tools - Works across multiple time frames Cons - Can be confusing - No predictive power on its own - Highly subjective - Prone to false signals - Market conditions affect effectiveness ## The Bottom Line Overall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Fidelity. "[Fibonacci Retracement](https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/fibonacci-retracement)." 2. K. K. Tung. "[Fibonacci Numbers, the Golden Ratio, and Laws of Nature?](https://assets.press.princeton.edu/chapters/s8446.pdf)," Pages 1-6. Topics in Mathematical Modeling. Princeton University Press, 2007. 3. The Trading Analyst. "[What are Fibonacci Extensions?](https://thetradinganalyst.com/fibonacci-extensions/)" 4. Harmonic Trader. "[The Gartley Pattern](https://harmonictrader.com/harmonic-patterns/gartley-pattern/)." 5. Elliot Wave International. "[Fibonacci Relationships](https://www.elliottwave.com/waveopedia/fibonacci-relationships/)." 6. Quant Institute. "[Fibonacci Retracement: Trading Strategy, Python Implementation and More](https://blog.quantinsti.com/fibonacci-retracement-trading-strategy-python/)." Compare Accounts Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. 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Readable Markdown	### Key Takeaways - Fibonacci retracement levels, derived from the Fibonacci sequence, are used to identify potential support and resistance levels. - Key percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.1 - Traders use these levels to place entry orders, set stop-loss levels, and determine price targets. The popular technical indicator can be found on popular [online brokerage platforms](https://www.investopedia.com/best-online-brokers-4587872). - Fibonacci retracement levels are often used with other technical analysis tools to improve trading strategies. - Risks include the potential for false signals and the need for additional confirmation. Fibonacci retracement levels are among the go-to tools for traders looking to identify potential support and resistance zones during pullbacks. The technical indicator is often found on leading [online brokerage and trading platforms](https://www.investopedia.com/best-online-brokers-4587872) and is rooted in the Fibonacci sequence. These levels help traders spot key price areas where securities might pause, reverse, or continue trending. We take you through what you need to know below. ## Understanding Fibonacci Retracement Levels Fibonacci retracement levels are used to find potential support and resistance areas by measuring how much a security's price pulls back before continuing in its trend. Key levels such as 38.2%, 50%, and 61.8% are widely used because they align with market psychology, support and resistance zones, and technical indicators like moving averages.1 ### Historical Background The Fibonacci sequence is rooted in ancient mathematics, initially appearing in Indian and Arabic traditions before being introduced to Western Europe by Leonardo of Pisa (Fibonacci) in the 13th century. His book, "Liber Abaci," popularized the sequence and helped replace Roman numerals with the more efficient Hindu-Arabic number system.2 Beyond mathematics, Fibonacci's work has influenced fields such as science, nature, architecture, and finance, due to its connection to the [golden ratio](https://www.investopedia.com/articles/technical/04/033104.asp), which appears in everything from plant growth to technical analysis. ## How Fibonacci Retracement Levels Work To apply the retracement levels, traders need to identify the market trend. Is the security or market in an uptrend, with higher highs and higher lows, or conversely in a downtrend, with lower highs and lower lows? Once the trend is identified, traders should choose the swing high and swing low as reference points. Most trading platforms feature Fibonacci retracement tools that automatically generate key levels, including 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support in uptrends and resistance in downtrends, helping traders anticipate price reactions. Shallow retracements, such as the 38.2% retracement, suggest strong momentum, while deeper retracements, like the 78.6% retracement, may indicate potential trend reversals in volatile markets. ### Fast Fact The golden ratio, known as the divine proportion, can be found in various spaces, from geometry to human DNA. ## Applications in Trading In trading, the Fibonacci retracement levels are used to pick out entry points, especially if not wholly for price pullbacks in a trending market. The 38.2%, 50%, and 61.8% levels are the most commonly watched zones for potential reversals. In an uptrend, traders look for price pullbacks, as well as bullish confirmation, such as candlestick patterns or [relative strength index](https://www.investopedia.com/terms/r/rsi.asp) indicators, to identify oversold conditions and enter long positions. In a downtrend, traders wait for a throwback (opposite of a pullback) toward a Fibonacci resistance level and confirm bearish momentum before entering short trades. To manage risk, traders place [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp) just beyond the next Fibonacci level to prevent getting stopped out because of normal price fluctuations while protecting themselves against unexpected trend reversals. Fibonacci extensions are used for profit target levels. They are projected after the security resumes the overall trend. Key extension levels include 100%, 161.8%, and 261.8%.3 ### Example ES1! Fib Retracement Part I. Tradingview The image above illustrates S\&P 500 e-mini [futures](https://www.investopedia.com/the-best-futures-trading-platforms-8774357) traded during a one-hour time frame in January 2025. Based on the chart, the pivot high has been observed to be 6,162.25, and the pivot low is set at 5,809. If the security were to decline toward 5,809, it would be a 100% retracement. Retracement levels are calculated as follows: - Retracement Level - Pivot High - (Retracement Percentage × Price Range) with - Price Range = Pivot High - Pivot Low For example, the 61.8% retracement level in this case would be as follows: Price Range = 6,162.25 - 5,809 = 353.25 - 61\.8% retracement level = 6,162.25 - (0.618 × 353.25) = 6,162.25 - 218.30 = 5,944.00 In this situation, a trader bullish on S\&P 500 e-mini [futures](https://www.investopedia.com/the-best-futures-trading-platforms-8774357) is looking for an appropriate entry price. The trader sets the pivot high and pivot low as described above on the charting platform and awaits some retracement on the security. The security does pull back, retracing to a point between the 50% and 61.8% levels. The trader then enters a long position, with a stop-loss order a little below the 61.8% retracement level and a target of the previous pivot high. ES1! Fib Retracement Part II. Tradingview After some time, a check reveals the position remains positive and hasn't returned to the previous pivot high. The [trader](https://www.investopedia.com/the-best-brokers-for-day-trading-8762913) exits with a small profit. ### Using With Other Technical Analysis Tools In many cases, using Fibonacci retracement levels is better done with other technical analysis tools and strategies, such as Gartley patterns and Elliot Wave theory. The [Gartley pattern](https://www.investopedia.com/terms/g/gartley.asp), a type of harmonic pattern, uses Fibonacci levels to structure its four-leg price formation: X-A, A-B, B-C, and C-D. The D-point is at the 78.6% retracement level, acting as an entry point. Traders confirm alignment with Fibonacci levels before entering a trade, placing stop-losses beyond the X-point and targeting Fibonacci extension levels for profit-taking.4 [Elliot Wave theory](https://www.investopedia.com/terms/e/elliottwavetheory.asp) uses Fibonacci levels to forecast market cycles and pinpoint impulse and corrective waves. Traders use Fibonacci retracements to help spot pullback zones in Wave 2 and Wave 4, while Fibonacci extensions help project price targets for Wave 3 and Wave C.5 By integrating Fibonacci levels with Elliot Wave theory and Gartley patterns, trend lines, and momentum indicators such as the [Moving Average Convergence Divergence](https://www.investopedia.com/terms/m/macd.asp) (MACD) and the [Relative Strength Index](https://www.investopedia.com/terms/r/rsi.asp) (RSI), traders can achieve a more structured, rule-based approach to market analysis and trading. ### Important Market trends are more accurately identified when other analysis tools are used with the Fibonacci approach. ## Limitations and Further Considerations While Fibonacci retracement levels are popular, they aren't foolproof and have limits. Arguably, the biggest challenge is the subjectivity in selecting swing points, as different traders choose different high and low points, leading to conflicting retracement levels. Fibonacci retracement prediction levels are low. Prices can break through levels instead of reversing as expected. Their effectiveness also depends on market conditions, as they work best in trending markets and are more unreliable in choppy environments. There is the potential for [false signals](https://www.investopedia.com/terms/f/false-signal.asp) and breakouts where the price briefly respects a Fibonacci level before continuing in the opposite direction. This can lead to premature stop-loss triggers and poor trade execution. If multiple retracement levels are clustered closely together, prices may react unpredictably, causing confusion.6 There is also [confirmation bias](https://www.investopedia.com/terms/c/confirmation-bias.asp) involved, which occurs when traders force the Fibonacci levels onto their charts, only seeing what supports their idea. ### Common Criticisms Many argue that Fibonacci retracement levels create ambiguity, making it difficult to determine whether [support or resistance](https://www.investopedia.com/trading/support-and-resistance-basics/) will hold true. Others point out the lack of scientific backing, as Fibonacci's natural patterns don't necessarily dictate financial market behavior. The most common criticism relates to the tool's subjectivity. Since traders select different swing points, this can lead to inconsistent results and false signals or breakouts when the price doesn't respect these levels. In addition, others argue that Fibonacci levels work primarily as part of a self-fulfilling prophecy because many traders use them, thereby influencing market reactions. ## Pros and Cons of Fibonacci Retracement Levels Pros - Identifies support and resistance levels - Works well in trending markets - Robust risk management tool - Can be used with other technical analysis tools - Works across multiple time frames Cons - Can be confusing - No predictive power on its own - Highly subjective - Prone to false signals - Market conditions affect effectiveness ## The Bottom Line Overall, Fibonacci retracement levels are most effective when used alongside other technical indicators and market analysis, rather than as a stand-alone strategy. While they provide a structured approach to identifying support and resistance levels, traders should remain flexible, confirm signals, and be mindful of their limitations, including the potential for false signals.
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