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Technical IndicatorsUpdated Jun 1, 2026

Fibonacci Retracement

Horizontal lines drawn between a recent high and low at 23.6%, 38.2%, 50%, 61.8%, and 78.6% โ€” areas chart-watchers expect price attention to return to.

Formula

Level price = high โˆ’ (high โˆ’ low) ร— ratio (e.g. 38.2% retracement = high โˆ’ (high โˆ’ low) ร— 0.382)

Example

Standard retracement

Setup
A stock ran from $100 to $200. Now it's pulling back.
Calculation
38.2% retracement = $200 โˆ’ ($200 โˆ’ $100) ร— 0.382 = $161.80. 61.8% retracement = $200 โˆ’ ($200 โˆ’ $100) ร— 0.618 = $138.20.
Takeaway
Watchers would highlight $161.80 and $138.20 as Fibonacci levels for this move.

What it is

Fibonacci retracement is a charting tool. You pick a recent high and a recent low and draw horizontal lines at fixed percentages of the move between them:

  • 23.6% โ€” shallow pullback
  • 38.2% โ€” common
  • 50% โ€” not a Fibonacci number, but used by tradition
  • 61.8% โ€” the "golden ratio" level (ฯ† โˆ’ 1)
  • 78.6% โ€” deep pullback

Why people use it

Many traders watch these levels for pullbacks during an uptrend (or rallies during a downtrend), on the theory that markets often re-test percentages of a prior move before continuing.

There's no rigorous reason these specific percentages should "work" โ€” they come from the Fibonacci ratio (โ‰ˆ 0.618 and its complements). The fact that many traders watch them can create self-fulfilling reactions at those levels.

What it isn't

A Fibonacci retracement is a layout of lines. It doesn't tell you the stock will bounce โ€” only where bounces have a reputation for happening.

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