Fibonacci Retracement

Fibonacci retracement draws horizontal lines at the Fibonacci ratios — 23.6%, 38.2%, 50%, 61.8%, and 78.6% — of a prior price swing. The idea is that pullbacks within a trend tend to find support or resistance at these ratios. The 50% and 61.8% levels are by far the most-watched, with the "golden pocket" between them (61.8%-65%) being the deepest pullback most healthy trends will tolerate. Fibs are not magic numbers — they work because so many traders use them. They're a self-fulfilling prophecy: if half the market is watching the 61.8% retrace as support, that level becomes real support because half the market buys there. The bigger the timeframe and the more obvious the prior swing, the more reliable the fibs. The trade idea is simple: in an uptrend, draw the fib from swing low to swing high, then look for longs at the 50% or 61.8% retracement. Stop goes below the 78.6% level — if price gets that deep, the pullback is no longer a pullback.