Levels and zones
Fibonacci retracements
Fractions of the last swing (38.2%, 50%, 61.8%, 78.6%) that traders watch for pullbacks to end.
Widely taught. The Exchange can test it on public price history and will say what it finds.
No test in currencies or gold was found. One equity-market study found bounces depended on how wide the zone was. Claims that the specific ratios beat other levels were not traced to a source.
What it is
Draw from a swing low to a swing high, then read the levels at those fractions of the distance. The choice of swing points changes every level.
What it suggests
If price reacts at these levels, the likely reason is that many people watch them. That cannot be verified from a chart.
How to check it
Choose the swing points by a stated rule, and look for a second reason at the same price, such as a prior level.
Common mistakes
- Redrawing the swing until a level lines up.
How we will test it
On public price history, never on anyone's account. Until it is done, the note above is all we can honestly say.
- Cases: pullbacks in a trend that reach 50% or 61.8% of the last swing
- Measure: share that resume the trend versus pullbacks that reach a non-Fibonacci fraction such as 55%
- Window: next 20 bars
- Compared with: pullbacks to fractions with no special following
Sources
- Tsinaslanidis, Guijarro and Voukelatos (2022), Automatic identification and evaluation of Fibonacci retracements: empirical evidence from three equity markets, Expert Systems with Applications 187 (equities only) (citation and headline finding only)
Related lessons
Written in our own words. Education only, not financial advice.