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Technical analysis
Fibonacci Retracement: What It Is and How to Draw It
Fibonacci retracement is a chart tool that divides the move between a swing low and a swing high into horizontal levels at 23.6, 38.2, 50, 61.8 and 78.6 percent. Traders use these Fibonacci retracement levels as reference points for pullbacks. The levels are drawing conventions, not laws, and they do not predict reversals.
In brief
What is a Fibonacci retracement?
A fibonacci retracement measures how far price has pulled back within a move. Here is where the ratios come from, how to draw the levels step by step, and the mistakes that change the drawing.
Key takeaways
- A Fibonacci retracement divides the move from a swing low to a swing high into levels at 23.6, 38.2, 50, 61.8 and 78.6 percent of that range.
- The 23.6, 38.2 and 61.8 percent levels are values that ratios of Fibonacci numbers approach. The 78.6 percent level is a fractional power of the golden ratio that those ratios do not produce, and 50 percent is a convention.
- In an uptrend, draw from the swing low to the swing high. In a downtrend, draw from the swing high to the swing low.
- A level is a reference point, not a forecast. The tool gives no evidence that price will stop or reverse at any level.
- Check the labels after you draw, because platforms can place the 0 and 100 percent lines differently.
What a Fibonacci retracement measures
A Fibonacci retracement is a set of horizontal lines drawn across a price move. The move runs from a swing low to a swing high, or the reverse. Each line marks how far price has pulled back from the end of the move, as a share of the range between the two swing points. Fidelity's technical indicator guide describes the same construction: a trend line is drawn between two extreme points, and the percentages are applied to the difference between the high and the low.
Fidelity's guide lists six lines: 0, 23.6, 38.2, 50, 61.8 and 100 percent, where the two outer lines are the swing points themselves. The 78.6 percent level is not on that list, so check which lines your own platform plots, including whether it adds 78.6 percent. For the broader idea of prices that have stalled before, see support and resistance.
Where the ratios come from, and what 50 percent is
The Fibonacci sequence runs 1, 1, 2, 3, 5, 8 and so on, where each number is the sum of the two before it. The sequence comes from Fibonacci's Liber abaci, which the University of St Andrews MacTutor archive dates to 1202. As the sequence grows, the ratio of one number to the next settles towards 0.618. The ratio of alternate numbers settles towards 0.382. The Wolfram MathWorld entry on Fibonacci numbers states that ratios of successive terms approach the golden ratio, and that alternate ratios converge to the inverse square of that ratio. The same arithmetic shows that numbers three places apart settle towards 0.236: for example, 55 divided by 233 is about 0.236.
The golden ratio is about 1.618, and its inverse is about 0.618. The 61.8 percent level is the inverse golden ratio, 38.2 percent is the inverse square and 23.6 percent is the inverse cube. These three levels are whole-number powers of the golden ratio, and each is a value that ratios of Fibonacci numbers approach.
The 50 percent level is different: it is not a power of the golden ratio, and no ratio in the sequence settles towards it, so it is a convention. The 78.6 percent level is about 0.786, the square root of 0.618, which is the golden ratio raised to the power minus one half. That is a fractional power, and ratios of Fibonacci numbers settle only towards whole-number powers such as 0.618, 0.382 and 0.236. Label 50 percent as a convention, and do not present 78.6 percent as a ratio from the sequence.
How to draw a Fibonacci retracement, step by step
This section shows how to use Fibonacci retracement on a chart. Choose the swing points first, then set the tool. The steps below assume an uptrend, where the swing low comes first. For a downtrend, reverse the order.
- 01
Find the swing low and the swing high
Locate the most recent clear swing low and the swing high that ends the up move. Use the same price convention each time, and note the timeframe you used.
- 02
Anchor the tool on the two points
Click the tool on the swing low and drag it to the swing high. Check which end point your platform labels as 0 percent, because the labels can run in the opposite direction to what you expect.
- 03
Measure the range
The range is the swing high minus the swing low. Each retracement level is a fraction of that range, measured back from the high in an uptrend.
- 04
Confirm the five levels
Check that the 23.6, 38.2, 50, 61.8 and 78.6 percent lines are present. Compare one of them with your own arithmetic, as the worked example below does.
- 05
Reverse the direction for a downtrend
In a downtrend, draw from the swing high to the swing low. The levels then measure how far a bounce up has travelled from the low, and they sit above the low.
- 06
Keep the drawing current
Redraw when a new swing forms, and date the drawing. An old drawing can describe a range that no longer matters.
Fibonacci retracement worked example with exact prices
This is an illustrative example with round numbers. It is not a market quote and not a trading suggestion. Assume an uptrend with a swing low at 100.00 and a swing high at 150.00. The range is 150.00 minus 100.00, which is 50.00. Each level price is the swing high minus the range multiplied by the percentage.
| Level | Calculation | Level price |
|---|---|---|
| 23.6% | 50.00 x 0.236 = 11.80 | 150.00 - 11.80 = 138.20 |
| 38.2% | 50.00 x 0.382 = 19.10 | 150.00 - 19.10 = 130.90 |
| 50.0% | 50.00 x 0.500 = 25.00 | 150.00 - 25.00 = 125.00 |
| 61.8% | 50.00 x 0.618 = 30.90 | 150.00 - 30.90 = 119.10 |
| 78.6% | 50.00 x 0.786 = 39.30 | 150.00 - 39.30 = 110.70 |
Example figures only. Prices are rounded to two decimal places and are not a quote for any instrument.
In a downtrend with a swing high at 150.00 and a swing low at 100.00, the same percentages are added to the low instead: 111.80 (23.6%), 119.10 (38.2%), 125.00 (50.0%), 130.90 (61.8%) and 139.30 (78.6%). Every level must sit between the two swing points, which is a quick check that the drawing is the right way round.
Common mistakes when drawing Fibonacci retracements
Most errors come from the anchor points or the direction of the drawing, not from the arithmetic. The table lists the mistakes that change the levels most often, with a fix for each.
| Mistake | What goes wrong | Fix |
|---|---|---|
| Anchoring on a swing that is not a clear turn | Small wiggles move the levels, so the drawing looks precise but has no firm reference. | Anchor on a swing the chart shows clearly, and state the timeframe. |
| Treating 50 percent as a Fibonacci ratio | The sequence gets credit for a level it does not produce. | Label 50 percent as a convention, as this page does. |
| Drawing in the wrong direction for the trend | The levels do not show the pullback you are measuring. | Draw low to high in an uptrend and high to low in a downtrend. |
| Reading a level as a target or a reversal | Nothing in the tool shows that price will react at the level, and a level that held before may not hold again. | Use the level as a reference only, and test it against other evidence and your own data. |
| Keeping drawings after new swings form | The levels describe a range that is no longer the current structure. | Redraw from the latest swing points and date the drawing. |
| Ignoring the platform's labels | Platforms can put 0 percent at the start point or the end point, so the same drag can give mirror-image levels. | Check the labels after drawing, and confirm one level against the arithmetic. |
What the levels do and do not show
The levels describe arithmetic on a price range. They do not show why price moved, how long a pullback will last or whether it will reverse. Fidelity's guide describes the levels as support and resistance that traders can use to set price objectives. It also says that countertrend moves tend to fall into certain parameters, which it often identifies as the retracement levels. That describes how some traders use the levels. It is not evidence that the levels predict prices.
A level that a pullback respected in the past is a record of past price, not a forecast. Test any use of the levels on your own data, across many examples, before you rely on them. For a different framework that describes the same price moves as waves, read Elliott wave theory. For the lines that frame a trend, read how to draw trendlines, and for the wider market context see technical analysis.
Risk disclosure
- Fibonacci retracement levels are drawing conventions. They do not predict reversals, and a price that stops at a level can keep moving.
- The choice of swing points changes every level. Two traders can draw different charts from the same price history, and both can look correct.
- Not every guide lists the same levels. Whichever levels a platform plots, their presence on a chart is not evidence that price will react to them.
- Trading can lose money. Losses can be larger than expected in fast markets or after a gap, and no chart tool removes that risk.
- This page is educational and is not personal financial advice. The worked example uses round numbers and is not a quote.
RTX5 status
RTX5 is Orrnn's trading terminal and broker-technology product. Its Windows desktop client is in preview, and the web and mobile clients are planned. A Google Play listing for Android is published, but the mobile client has no approved release record yet; check the product-availability record before relying on any RTX5 feature. The worked example on this page is arithmetic only and does not come from an RTX5 feature.
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Primary references
Sources were checked on 9 November 2026. They explain market rules and concepts; they do not certify RTX5 or provide individual financial advice.
Fidelity Learning Center: Fibonacci retracementLists the levels 0, 23.6, 38.2, 50, 61.8 and 100 percent (it does not list 78.6 percent). Says a trend line is drawn between two extreme points and the percentages apply to the high-low range. Describes the levels as support and resistance that can be used to target price objectives. Page undated; checked 9 November 2026.Wolfram MathWorld: Fibonacci NumberStates that the ratios of successive Fibonacci numbers approach the golden ratio, and that ratios of alternate Fibonacci numbers are convergents to the inverse square of the golden ratio. Does not mention the retracement levels or 50 percent. Checked 9 November 2026.MacTutor, University of St Andrews: Fibonacci biographyStates the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 and dates it to Liber abaci, 1202. Does not state the golden ratio or any retracement level. Checked 9 November 2026.RTX5 product availabilityRTX5 status record. Check it to see which RTX5 products and clients are live before relying on any feature.
Questions readers ask
What is a Fibonacci retracement?
A Fibonacci retracement is a set of horizontal lines drawn across a swing low and a swing high, at 23.6, 38.2, 50, 61.8 and 78.6 percent of the range, measured back from the end of the move. The levels describe arithmetic on a price range and do not show that price will reverse at any of them.
Are the Fibonacci retracement levels all Fibonacci ratios?
Only some of them. The 23.6, 38.2 and 61.8 percent levels are values that ratios of Fibonacci numbers approach. The 50 percent level is a convention. The 78.6 percent level is about the square root of 0.618, a fractional power of the golden ratio that the sequence ratios do not produce. Whichever levels you use, the Fibonacci name does not make a level more likely to hold.
Do Fibonacci retracement levels predict reversals?
No. The levels show where fixed percentages of a chosen range sit. They do not show whether price will stop, bounce or reverse at a level. Some traders use them as reference points, and a level that held before may not hold again. Test any use of them on your own data before relying on them, and treat the output as a description of the chart.
Should I draw from the swing low or the swing high?
Draw from the swing low to the swing high in an uptrend, and from the swing high to the swing low in a downtrend. Many tools label the start and end points differently, so check the labels after you draw. Choose swing points that are clear on your chart, and state the timeframe you used.
Why does a Fibonacci tool on another platform show different levels?
Tools can differ in the points they anchor to, the price convention they use, and whether the 0 percent line sits at the start or the end point. Two drawings can therefore differ and still be correct for their settings. Check how your platform labels the 0 and 100 percent lines, and confirm one level against the arithmetic on this page.
Keep learning
Support and resistanceHow traders describe prices where buying or selling has stalled before, and why that is not a forecast.How to draw trendlinesHow to anchor a trend line on swing points, and the errors that change its slope.Elliott wave theoryA wave-based framework for describing price moves, with its own assumptions and limits.Technical analysisThe wider set of chart tools and how they fit into a trading process.What is trading?The basics of trading instruments, orders and risk.