How to use Fibonacci retracement

After a move up or down, price rarely goes straight to the end — it pulls back along the way. Fibonacci retracement uses a set of ratios (0.236, 0.382, 0.5, 0.618, 0.786) to estimate where those pullbacks might pause.

How to draw it

Pick a "significant" leg: in an uptrend, drag from the low to the high and the tool marks the ratio levels between; in a downtrend, drag high to low. Those levels are the reference band where a pullback may find support (or resistance).

Which levels matter most

• 0.618 (golden ratio): the most-cited retracement;
• 0.5: not strictly Fibonacci, but psychologically strong;
• 0.382: a common shallow pullback in strong trends.

When a Fib level overlaps prior highs/lows, support/resistance or a moving average, it's worth more ("confluence").

Not a precise signal

Fibonacci is a probabilistic reference zone, not an exact entry. Price tends to react "around" a ratio, not to the tick. Treat it as "an area to watch", then confirm with candles and volume. Its cousin, "Fibonacci extension", estimates targets (e.g. 1.618).