Definition
Fibonacci retracements identify potential reversal levels by applying Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) to a price move. These levels often act as support during pullbacks in uptrends or resistance during rallies in downtrends.
Example
If a stock rises from $40 to $60, the 50% retracement is $50 and 61.8% is $47.64. Traders watch these levels for potential support during pullbacks.
FAQ
What is Fibonacci Retracement?
Horizontal lines indicating potential support/resistance based on Fibonacci ratios.
Why is Fibonacci Retracement important?
Fibonacci Retracement helps investors evaluate technical analysis and make more informed decisions.