what is Fibonacci Retracement

Fibonacci retracement

Fibonacci retracement plots possible support and resistance levels from an ongoing trend by identifying key Fibonacci ratios within the trend's range. As per Elliot wave theory, an impulse wave is followed by a corrective wave where investors either take profit or selling pressure is starting to build up because the price has become expensive. Fibonacci retracement levels shows possible points of reversal of these waves. Fibonacci retracement ratios except for the 0.500 (50%) level are as follows.

0.236 (23.6%)
0.382 (38.2%)
0.500 (50%)
0.618 (61.8)
0.764 (76.4%)

The 50% retracement level was not derived from the Fibonacci numbers but traders usually believe based on historic trends that markets tend to pull back 50% and then reverse to continue whichever direction it is headed.

Fibonacci retracement

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