Fibonacci Levels - Retracement & Extensions
Master Fibonacci retracement and extension levels. Learn the key ratios, how to draw correctly, and how GarudaAlgo uses Fibonacci for targets.
What are Fibonacci Levels?
Fibonacci levels are horizontal lines that indicate potential support and resistance levels based on the Fibonacci sequence discovered by mathematician Leonardo Fibonacci in the 13th century.
The sequence (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144...) creates key ratios when dividing adjacent numbers. These ratios appear throughout nature and, remarkably, in financial markets.
Key Fibonacci Ratios
- 23.6% — Shallow retracement, strong trends
- 38.2% — Standard retracement level
- 50.0% — Not a Fibonacci number, but widely used
- 61.8% — The "Golden Ratio" - most important level
- 78.6% — Deep retracement, last line of defense
Retracement Levels
Fibonacci retracements show where price might find support during a pullback within a trend. Draw from swing low to swing high (uptrend) or high to low (downtrend).
23.6%
Shallow pullback
Strong momentum
38.2%
Standard pullback
Common bounce
50.0%
Half retracement
Psychological level
61.8%
Golden Ratio
Key reversal zone
78.6%
Deep retracement
Last support
How to Draw Retracements
Uptrend: Click swing LOW, drag to swing HIGH
Downtrend: Click swing HIGH, drag to swing LOW
The tool then projects potential support/resistance levels where price may react.
Extension Levels
Fibonacci extensions project where price might go after completing a retracement. Used for profit targets.
127.2%
First extension
Conservative target
161.8%
Golden extension
Primary target
200%
Double move
Extended target
261.8%
Major extension
Trend exhaustion
Using Extensions for Targets
After price bounces from a retracement level:
- TP1: Previous high/low (0% level)
- TP2: 127.2% extension
- TP3: 161.8% extension
How GarudaAlgo Uses Fibonacci
GarudaAlgo Enhancement
GarudaAlgo automatically identifies recent swing highs/lows and calculates Fibonacci levels in real-time. When price approaches key levels (especially 61.8%), combined with other confluence factors, signal probability increases significantly.
Fibonacci in Signal System
Fibonacci analysis is part of the 9% Support/Resistance weight in GarudaAlgo's signal system.
What GarudaAlgo Analyzes
- Auto-drawn Levels: Automatic swing detection for Fibonacci placement
- Level Confluence: Fib levels aligning with other S/R (stronger zones)
- Price Reaction: How price behaves at each Fib level
- Target Projection: Extension levels for take profit suggestions
- Multi-timeframe Fibs: Alignment across H1, H4, Daily levels
Trading Strategies
Strategy 1: Retracement Entry
- Identify clear trend with swing high and swing low
- Draw Fibonacci from swing point to swing point
- Wait for price to retrace to 38.2%, 50%, or 61.8% level
- Look for reversal candle pattern at the level
- Enter with stop below 78.6%, target at previous swing
Strategy 2: The Golden Zone
- The zone between 50% and 61.8% is called the "Golden Zone"
- This is the optimal entry area for trend continuation
- Wait for price to enter the golden zone
- Enter when you see bullish/bearish confirmation
- Higher probability than trading any single level
Strategy 3: Fib Confluence
- Draw Fibonacci from multiple timeframes
- Identify where levels from different timeframes overlap
- These confluence zones are extremely strong S/R
- Trade reactions at these cluster zones
Best Practices
- Draw from clear swings — Don't use minor price fluctuations
- 61.8% is the most important level — The Golden Ratio
- Use with other confirmation — Fibonacci + candlestick patterns + indicators
- Respect level breaks — If 78.6% breaks, trend may have reversed
- Multiple timeframe alignment — Stronger levels when aligned across timeframes
- Not all retracements work — Fibonacci shows potential levels, not guarantees