Trends/Fibonacci and harmonic patterns

Fibonacci retracement

Horizontal levels drawn at set fractions of a price swing, to show how far a pullback has gone.

Fibonacci and harmonic patternsBest on 3M, 6M, 1YAlso called Fib retracement

Illustration of the Fibonacci retracement shape. It is a sketch, not real price data.

What it shows

After a rise, price often pulls back. A Fibonacci retracement divides the rise into fractions: 23.6%, 38.2%, 50%, 61.8% and 78.6%. Each level is a horizontal line. The lines show how much of the rise a pullback has given back.

The ratios come from the Fibonacci sequence (1, 1, 2, 3, 5, 8, 13...), where dividing a number by the next one gets close to 61.8%. Whether markets respect these levels is debated. We show them because many traders watch them, which can make them matter.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Find the most recent major swing: a swing low followed by a swing high (or the reverse).
Measure the height of the swing.
Draw lines at 23.6%, 38.2%, 50%, 61.8% and 78.6% of the height back from the end.
Mark the levels price turned near.

Starting values: Levels 23.6, 38.2, 50, 61.8, 78.6%; Minimum swing 10% of price; Touch distance 0.5%. These are proposed and will be tuned on real price data before launch.

How to read it

Cyan lines are the retracement levels. The top is the swing high and the bottom is the swing low.
The deeper the pullback, the larger the fraction given back.
Dots (when shown) mark where price turned near a level.

Status labels you may see

Label	What it means
Above 38.2%	Pullback has given back less than 38.2% of the swing.
Between 38.2% and 61.8%	A middle pullback.
Below 61.8%	A deep pullback.
Past the start	Price is below the swing low.

What cancels it

A close beyond the start of the swing, which removes the swing as a reference.

What traders check next

Whether the swing chosen is the right one. Different swings give different levels.
Whether levels line up with other levels.
Volume while price is at the levels.

Limits

Levels depend on which swing you pick.
Price often passes through them.
With five levels on a chart it is easy to find one price reacted to.

Try it in forecastviz

Open any ticker and choose Fibonacci and harmonic patterns → Fibonacci retracement in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with Fibonacci extension and Golden pocket on the same chart.

Open on a ticker

Questions

Why 61.8%?

It is a ratio from the Fibonacci sequence. There is no proof that markets respect it.

Is 50% a Fibonacci level?

No. It is added by convention.