Fibonacci Retracements
After a rally, prices often pull back and find support near 38.2%, 50% or 61.8%.
Every lesson has an interactive simulation you can drag and play, plus a quick quiz. Sign up free to use them and save your progress automatically. Here is the text version of this lesson.
Not sure yet? Try the first lesson (no sign-up needed)「How to Read a Candlestick Chart」。
Text version · Technical Analysis: Candles & Charts, lesson 8: “Fibonacci Retracements”
After a rally, prices often pull back and find support near 38.2%, 50% or 61.8%.
Retracement = high − range × ratio
After a rally, price often pulls back and holds near 38.2%, 50% or 61.8%. Common ratios: 23.6%, 38.2%, 50%, 61.8%, 78.6%.
Only "possible" support/resistance zones
Fibonacci levels aren't exact "magic prices." Read them together with other signals like support/resistance and candlestick patterns (confluence).
Did you pick the right start and end?
The retracement levels depend entirely on which swing you measure: start from a different swing point and the lines land somewhere else. Pick the most obvious swing low and high, and don't cherry-pick swings to "match" a price.
Key takeaways
- Retracement level after a rally = high − (high − low) × ratio; bounce level after a decline = low + (high − low) × ratio.
- Common ratios: 23.6%, 38.2%, 50%, 61.8%, 78.6% (50% isn't a Fibonacci ratio, but it's just as widely used).
- Retracement levels depend on the swing start and end you choose. They're only "possible" support and resistance zones, best combined with other signals.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click "Example: 100 → 200": what are the 61.8% and 50% retracement levels?
- Keep the 61.8% script and click "Play what's next": near which line does price stop falling? How far from it?
- Change the "Pullback depth" script to 38.2% and click "Play what's next" again: near which line did price stop this time? What does "Deepest retracement" show?
- Switch to "Fall, then rebound," click the high first and then the low: how do you work out the bounce's 61.8% retracement level?
Quiz and explanations
- 1. The price rises from $100 to $200. Where's the 61.8% retracement level?
- Answer: $138.2.$200 − $100 × 0.618 = $138.2.
- 2. Same move. Where's the 50% retracement level?
- Answer: $150.It retraces exactly half.
- 3. The price rises from $50 to $80 and starts pulling back. Roughly where's the 38.2% retracement level?
- Answer: About $68.5.The move is $30: $80 − $30 × 0.382 ≈ $68.5. $61.5 is the 61.8% level, $65 is 50% and $72.9 is 23.6%.
Terms in this lesson
- confluence (Confluence): Several different kinds of signals pointing the same way at once.
- Fibonacci retracement (Fibonacci Retracement): Splitting a price move at ratios like 23.6%, 38.2%, 50% and 61.8% to find likely pullback levels.
- swing high / low (Swing High / Low): A local high (or low) with several lower (or higher) candles on each side, confirmed only after the candles on its right have formed.