Fibonacci Retracement

Filed Under » , ,
Dictionary Says

Definition of 'Fibonacci Retracement'

A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

Fibonacci Retracement
Investopedia Says

Investopedia explains 'Fibonacci Retracement'

Fibonacci retracement is a very popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses. The notion of retracement is used in many indicators such as Tirone levels, Gartley patterns, Elliott Wave theory and more. After a significant price movement up or down, the new support and resistance levels are often at or near these lines.

Related Definitions

  •

    Fifty Percent Principle

    A principle that predicts that, before the observed trend continues forward, a price correction of approximately 1/2 to 2/3 of the change in price will occur.
    Read More »

  • Retracement

    A temporary reversal in the direction of a stock's price that goes against the prevailing trend. A retracement does not signify a change in the larger trend. On a chart where a stock's ...
    Read More »

  • Fibonacci Numbers/Lines

    Leonardo Fibonacci was an Italian mathematician born in the 12th century. He is known to have discovered the "Fibonacci numbers," which are a sequence of numbers where each successive ...
    Read More »

    • Gartley Pattern

      In technical analysis, it is a complex price pattern based on Fibonacci numbers/ratios. It is used to determine buy and sell signals by measuring price retracements of a stock's up and ...
      Read More »

    • Elliott Wave Theory

      Theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.
      Read More »

    • Fibonacci Fan

      A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.
      Read More »

    • Fibonacci Arc

      A charting technique consisting of three curved lines that are drawn for the purpose of anticipating key support and resistance levels, and areas of ranging.
      Read More »

    • Support (Support Level)

      The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock. Often referred to as the ...
      Read More »

    • Resistance (Resistance Level)

      The price at which a stock or market can trade, but not exceed, for a certain period of time. Often referred to as "resistance level".
      Read More »

    • Tirone Levels

      A series of three sequentially higher horizontal lines used to identify possible areas of support and resistance for the price of an asset. The position of the center line is plotted by ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions