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S/R Methods

Fibonacci - Golden Ratios in Trading

Learn Fibonacci retracement and extension levels - how to identify hidden support/resistance with GarudaAlgo.

What is Fibonacci in Trading?

Named after the Italian mathematician Leonardo Fibonacci, these levels are derived from a mathematical sequence where each number is the sum of the previous two. In trading, these ratios act as "hidden" levels of support and resistance.

Retracement Levels

Used to find potential support/resistance during a pullback in a trend.

Extension Levels

Used to find potential profit targets after a trend resumes.

The Key Ratios

23.6%

Shallow retracement in very strong trends

38.2%

Common support/resistance in strong trends

50.0%

Psychological level (not a true Fib ratio)

61.8%

The Golden Ratio - highest probability of reversal

78.6%

Deep retracement, the last line of defense

How to Draw Fibonacci

  • Uptrend: Draw from Swing Low to Swing High
  • Downtrend: Draw from Swing High to Swing Low

Always include candle wicks for precise level calculation.

How GarudaAlgo Uses Fibonacci

GarudaAlgo Enhancement

GarudaAlgo automatically identifies swing points across multiple timeframes and plots Fibonacci retracements. Our system looks for 'Confluence' - where Fib levels align with other S/R markers for high-probability signals.

Fibonacci in Signal System

Fibonacci confluence contributes to the overall Support/Resistance (12%) weight in GarudaAlgo's system.

What GarudaAlgo Analyzes

  • Auto-Swing Detection: Identifies major/minor highs and lows
  • Multi-Timeframe Fibs: Checks confluence across M15, H1, H4
  • Zone Quality: Measures how many times a Fib level has held
  • Extension Targets: Automatic calculation of potential TP zones

Trading Strategies

Strategy 1: The Golden Entry

  1. Identify a strong trend move
  2. Wait for price to retrace to the 61.8% level
  3. Confirm with a bullish/bearish reversal candle
  4. Target the 0% level or -27% extension

Strategy 2: Fib Confluence

  1. Draw Fibs on both H4 and H1 timeframes
  2. Identify where levels from both timeframes overlap
  3. These 'hot zones' have much higher probability of holding

Strategy 3: Fib + Volume/S&D

  1. Look for a Fib level that aligns with a Supply/Demand zone
  2. Check for high volume at that specific price point
  3. Combined signals provide the highest confidence entries

Best Practices

  • Don't use Fibs in ranging markets — They are trend-following tools
  • Combine with Price Action — Never trade a level just because price touched it
  • The 61.8% is king — But 38.2% and 50% are also highly significant
  • Wicks matter — Drawing from candle bodies can miss the true psychological extreme
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