What are Fibonacci Retracements?

Fibonacci retracement levels derive from the golden ratio (1.618) and a small set of percentages tied to it: 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 50% level is technically not a Fibonacci ratio but is universally included as a psychological midpoint. The 61.8% level (the golden ratio) is conventionally the strongest retracement support/resistance. In an uptrend, the Fibonacci tool is dragged from the latest swing low to the swing high; the levels appear automatically as horizontal lines. In a downtrend the procedure is inverted. The 38.2%-61.8% band is treated as a healthy retracement zone — if price holds inside it and resumes the prior trend, continuation is likely; a sustained break below 78.6% is treated as exhaustion. Fibonacci extension levels (1.272, 1.414, 1.618, 2.0, 2.618) are used as profit targets when a trend exceeds the prior swing. Fibonacci is rarely sufficient by itself; pairing it with volume, RSI, and candle confirmation materially improves hit rate.