Fibonacci Retracement, Gauge Support and Resistance at 23.6%, 38.2%, 61.8%
TL;DR
- Fibonacci retracement uses ratios from the Fibonacci sequence (for example 23.6%, 38.2%, 61.8%) to mark pullback levels on charts.
- The ratios have a mathematical origin, but market effectiveness is probabilistic and should be used with other indicators and risk management.
What is Fibonacci retracement
Fibonacci retracement applies ratios derived from the Fibonacci sequence (for example 0, 1, 1, 2, 3, 5, 8 ...) to charts. Typically, traders connect a swing low and swing high of an upmove and plot retracement levels (commonly 23.6%, 38.2%, 50%*, 61.8%) to gauge potential support and resistance. The 50% level is not directly from the Fibonacci sequence but is often considered in practice.
Why it matters
Because many traders reference these ratios, psychological price zones can form around them. That makes the levels useful when confirmed with volume, moving averages, trendlines, and other signals. The ratios themselves are not a predictive law, so treat them as probabilistic tools.
Common misconceptions
- Many expect Fibonacci to give exact prices. In reality it only indicates levels where a reaction is more likely.
- Mechanical use of retracement ratios can create overconfidence. Responses vary by timeframe and market conditions.
- Treating the numeric origin as absolute is problematic. Markets move on human psychology and information.
Calculation example with hypothetical numbers
Example: a stock rises from a low of 10,000 KRW to a high of 15,000 KRW. The upmove is 5,000 KRW.
- 23.6% retracement: 15,000 - 5,000 * 0.236 = 15,000 - 1,180 = 13,820 KRW
- 38.2% retracement: 15,000 - 5,000 * 0.382 = 15,000 - 1,910 = 13,090 KRW
- 50% retracement: 15,000 - 5,000 * 0.50 = 12,500 KRW
- 61.8% retracement: 15,000 - 5,000 * 0.618 = 15,000 - 3,090 = 11,910 KRW
Summarized in the table below.
| Retracement ratio | Formula | Level (KRW) |
|---|---|---|
| 23.6% | 15,000 - 5,000×0.236 | 13,820 |
| 38.2% | 15,000 - 5,000×0.382 | 13,090 |
| 50% | 15,000 - 5,000×0.50 | 12,500 |
| 61.8% | 15,000 - 5,000×0.618 | 11,910 |
Interpretation tip: If price stalls or bounces at one or two of these levels, those ratios gain relevance. Confirm with volume changes, candle patterns, and other signals for higher confidence. See the Charts Technical Analysis tab for applying this on a chart.
This article is for informational purposes and is not investment advice.
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