Fibonacci Retracements
Measured pullback zones — 38.2%, 50%, 61.8% of the prior swing, where trend-joiners cluster their bids.
Core IndicatorsIntermediate 5 min read· Lesson 13 of 13 in Technical Analysis
Explanation
Draw from a swing low to swing high; the ratios mark how much of the move has been retraced. The math mystique is optional — what matters is that ENOUGH traders watch these zones to make them liquidity magnets, and that healthy trends typically retrace one-third to two-thirds before resuming.
Interpretation & use
Shallow retrace (≤38.2%) = strong trend, buyers impatient. The 50–61.8% zone is the classic 'buy the dip' pocket — strongest when it COINCIDES with independent evidence: a prior breakout level, a rising 50MA, a hammer printing there. Confluence is the entire game; a lone ratio is a hope.
Common mistakes
Drawing from arbitrary swings until a level 'catches' price, and treating levels as exact prices instead of zones. Fibs organize a pullback; they don't summon reversals.