Technique | Indicator
Fibonacci Retracement
"A technical analysis tool that identifies potential support and resistance levels based on the mathematical ratios of the Fibonacci sequence."
In-Depth Definition
Fibonacci retracement draws on the mathematical sequence of Leonardo Fibonacci (1, 1, 2, 3, 5, 8, 13…) whose key ratios are 23.6%, 38.2%, 50%, 61.8% (the 'Golden Ratio'), and 78.6%. In trading, the tool is drawn between a significant low and high (or the reverse) to identify zones where price is likely to find support or resistance during a retracement. The 61.8% level is considered the most powerful. These levels work partly because many traders watch them, creating a self-fulfilling prophecy. Fibonacci extensions (127.2%, 161.8%, 261.8%) are used to project price targets beyond the origin point.
StarQuant Insight
StarQuant automatically identifies significant Fibonacci levels across multiple timeframes and crosses them with Order Blocks or liquidity zones to select the strongest confluences, statistically increasing the probability of a price reaction.
Pro Tip
Never trade a Fibonacci level in isolation. Look for confluences: a Fib level that coincides with a support/resistance, an EMA, or an Order Block has a significantly higher probability of holding.