// Definition
Fibonacci retracement is a tool that draws levels, such as 38.2%, 50% and 61.8%, between a swing high and swing low to estimate where a pullback might stop.
Explained simply
You draw the tool from the start to the end of a move. It then marks the common retracement levels in between, where traders watch for the pullback to end and the trend to resume.
Fibonacci levels work best when they line up with other evidence, such as a support zone or a previous swing point.
Tip
Treat Fibonacci levels as areas to watch, not exact prices. Confluence with a real level is what makes them useful.
For education only, not financial advice. Trading is risky and you can lose money.