GlossaryIntermediate
Fibonacci Retracement and Extension
Horizontal levels drawn between a significant high and low at ratios derived from the Fibonacci sequence, used to identify potential support/resistance.
Fibonacci retracement draws horizontal levels between a significant swing high and swing low, at ratios derived from the Fibonacci number sequence (commonly 23.6%, 38.2%, 50%, 61.8%, and 78.6%), used to identify where a pullback within a larger trend might find support or resistance.
Fibonacci extension uses the same underlying ratios to project levels beyond the original high-low move, used to estimate potential targets if a trend continues past its starting range. See Kaavon's dedicated article for the full construction of both.
Examples
- The 61.8% Fibonacci retracement level is commonly discussed as a particularly significant level for a pullback to find support within an ongoing uptrend.
- Fibonacci extension levels are used to estimate a potential price target beyond the original move, while retracement levels address a pullback within it.