Fibonacci Retracement is a technical analysis tool used in stock trading to identify possible support and resistance levels.

It uses common Fibonacci levels such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%.

For example, if a stock rises from $100 to $200 and then starts to pull back, traders can use Fibonacci Retracement to estimate where the price may stop falling and possibly bounce.

Formula: (High − Current Price) ÷ (High − Low) = Retracement %

Example: (200 − 150) ÷ (200 − 100) = 50%

The most commonly watched levels are:

• 38.2% — a relatively shallow pullback
• 50% — a medium pullback
• 61.8% — an important level known as the Golden Ratio

Fibonacci Retracement does not predict exactly where the price will go. It simply shows areas where traders may pay more attention to possible support or resistance.