After a strong move, price usually pulls back before continuing. Fibonacci retracement is a simple tool that marks the levels where those pullbacks often stop.
You draw it from the swing low to the swing high of a move. It marks lines at 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 50% and 61.8% levels are the ones traders watch most.
Key takeaway
Anchor to the real swing low and high (the wick extremes). The 61.8% level is the classic place buyers look for a bounce.
Tip. Fib works best with confluence: a level that lines up with support or a trendline is far stronger than a fib line alone.