Fibonacci Retracement Explained
Fibonacci retracement measures how far a pullback goes against a move, marking levels — 0.382, 0.5, 0.618 — where trends often resume.
How to draw the levels
You anchor the tool from the start of a swing to its end — low to high in an uptrend, high to low in a downtrend. It then plots horizontal levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of that range, marking how deep a pullback has retraced.
The 0.5–0.618 zone — the 'golden pocket' — is the most watched. A healthy trend pullback often stalls and turns there, offering an entry in the trend direction. (0.5 isn't a true Fibonacci ratio but is included by convention.)
Using it well
Fibonacci is a confluence tool, not a standalone signal. Its levels are far stronger when they line up with a support/resistance level, an order block, or a prior swing — a fib level floating in empty space is weak.
A pullback that blows past 78.6% is a warning the move may be reversing rather than resuming. Use the retracement to plan entries in the direction of structure, not to catch falling knives.
See it live in Chart Bound
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Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What are the main Fibonacci retracement levels?
23.6%, 38.2%, 50%, 61.8% and 78.6%. The 61.8% level (and the 0.5-0.618 'golden pocket') is the most watched for trend-continuation entries.
How do I draw Fibonacci retracement?
Anchor the tool from the start to the end of a clear swing — low to high in an uptrend, high to low in a downtrend — and it plots the retracement levels across that range.
What is the golden pocket?
The zone between the 0.5 and 0.618 retracement levels, where trend pullbacks most often stall and reverse, making it a favoured entry area in the trend direction.