What is Fibonacci Retracement?

If you’ve been exploring trading strategies, you’ve probably come across the term Fibonacci Retracement. It’s one of the most popular tools used by traders to identify potential support and resistance levels in the market. But what exactly does it mean, and how do traders use it?

Fibonacci Retracement is based on the famous Fibonacci sequence, where each number is the sum of the two preceding ones. In trading, certain ratios derived from this sequence—such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%—are plotted on a price chart to help traders predict possible price pullbacks before the trend continues.

For example, if the market is in an uptrend, traders might expect the price to pull back to one of these Fibonacci levels before resuming the upward move. Similarly, in a downtrend, the retracement levels can act as potential areas where the price might bounce before continuing lower.

This tool is widely used in forex, stocks, commodities, and indices, making it a versatile addition to any trader’s strategy. It doesn’t guarantee success on its own but works best when combined with other indicators like moving averages or candlestick patterns.

If you’re trading with a broker like Exclusive Markets, you’ll find that Fibonacci Retracement is already integrated into platforms such as MT4 and MT5, making it easy to apply directly to your charts. This allows you to quickly analyze market movements and plan your entries and exits more effectively.

In short, Fibonacci Retracement is a simple yet powerful way to improve your technical analysis. If you’re just getting started, it’s definitely worth exploring and practicing on a demo account before applying it to live trades.