What does Fibonacci Retracement mean?

A Fibonacci retracement marks the levels — 38.2%, 50%, and 61.8% of a prior move — where a stock's price often pulls back before continuing its trend.

After a big move, price often pulls back to 38.2%, 50%, or 61.8% of the move before continuing. These Fibonacci levels are common spots where traders watch for bounces or reversals.

Fibonacci Retracement example

A stock rallies from $100 to $150. The common retracement levels sit at $138.20 (23.6%), $130.90 (38.2%), $125 (50%) and $119.10 (61.8%) — places traders watch for a pullback to pause.

Common beginner mistake

Treating the levels as precise. With five levels to choose from, a pullback will stop near one of them by chance alone.