What It Is
Fibonacci Retracement is a tool that identifies potential support and resistance levels based on the Fibonacci sequence - a mathematical pattern found throughout nature, from seashells to galaxies.
The key ratios (23.6%, 38.2%, 61.8%, etc.) are derived from relationships within the Fibonacci sequence. The most important is 61.8% - the Golden Ratio (φ), which appears repeatedly in natural phenomena and, remarkably, in financial markets.
Why does it work? Partly self-fulfilling prophecy - millions of traders watch these levels. Partly because markets are made of humans, and humans exhibit patterns. Regardless of the reason, these levels often act as turning points.
Trading Strategies
Trading Strategies Golden Pocket Entry Strategy Setting limit orders at the golden pocket with proper stop placement...
Combining Fib levels with support/resistance, moving averages, and candlestick patterns...
Using 1.618, 2.618 levels to project profit targets...
Golden pocket entries, confluence techniques, extensions for targets, and risk management.
The 0.618-0.65 zone (the golden pocket) is where the highest-probability Fibonacci entries occur. If price pulls back to this zone and shows a reversal candle, that's your trade.
Continue through core concepts
Compare this reference with related structures and readings before applying it to a live chart.