Fibonacci retracement calculator

Where the ratios come from

The Fibonacci sequence (1, 1, 2, 3, 5, 8, 13, 21) has the property that each number divided by the next converges on 0.618, and divided by the one after that converges on 0.382. Those two figures, plus their inverse 1.618, are the ratios plotted on a chart.

Whether markets have any inherent reason to respect them is genuinely debatable, and worth being honest about. The stronger explanation is reflexive: enough traders watch these levels, and enough algorithms place orders at them, that they become places where supply and demand actually concentrate. A level that thousands of participants are watching is a real level regardless of the mathematics behind it.

The practical consequence is that Fibonacci levels work best when they line up with something structural. A prior swing, a session high, a pivot. A retracement level floating in empty space is a much weaker proposition.

Using retracements and extensions

Retracements identify where a pullback within a trend may end. In an uptrend you draw from the swing low to the swing high, and the 38.2–61.8% zone becomes your area of interest for a long entry. With the stop below the swing low, because that is the price that invalidates the idea.

Extensions project where the resumed move may reach. The 1.272 and 1.618 levels beyond the original swing are the standard targets, and they pair naturally with a retracement entry: enter at 61.8%, target 1.618, and the reward-to-risk ratio is favourable by construction.

Two failure modes are worth naming. First, drawing the tool across the wrong swing. Pick the most recent clean impulse, not the largest one you can find. Second, treating the level as an entry signal by itself. A level tells you where; something else has to tell you whether. Size the resulting position with the position size calculator.