What do Fibonacci lines indicate?
These are reference lines that divide the rise and fall intervals I selected into specific ratios.
Table of contents
Remember this first
First, 3 things to remember
- 1First, select two prices: a starting price and an ending price.
- 2The lines are positions that divide the range between two prices by ratios.
- 3It does not necessarily mean the price will rebound at that line.
Select two points and divide the interval.
Fibonacci retracement is an indicator used to reference how much a price has fallen after a rise, or how much it has risen after a fall. "Retracement" means moving back in the opposite direction for a portion of the previous move.
The position of the lines changes depending on where you start and end. The tool does not provide the same correct price for everyone.
Let's assume it rose from 10 dollars to 20 dollars.
The range of the rise is 10 dollars. If it retraces by 5 dollars, which is half of that range, the price becomes 15 dollars. This is a 50% retracement.
Ratios such as 38.2% and 61.8% are also commonly displayed in the tool. 50% is not a ratio derived directly from the Fibonacci sequence, but it is often used together. The calculation below is an example to help understand the ratios.
| Retracement | Calculation | Price |
|---|---|---|
| 38.2% | 20−10×0.382 | $16.18 |
| 50% | 20−10×0.5 | $15.00 |
| 61.8% | 20−10×0.618 | $13.82 |
Distinguish between reference lines and conventions.
Just because a line is drawn at 15 dollars does not mean the price will necessarily stop there. The price may pass through the line and fall further.
First, write down why you chose the two reference points and compare how the actual price moved. Do not keep changing the reference points to find lines that seem to fit well.
You should not make such assumptions
“Because it is at the 61.8% position, the probability of a rebound is also 61.8%.”
It is a reference line that divides the range between two prices by ratios. It does not mean the price will necessarily stop at that level.
Check what you have read.
- Where are the starting and ending prices?
- Do you understand what the ratio is a ratio of?
- Have you seen cases where the price passed through the line?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Fibonacci RetracementNew window
Fidelity Investments · Verify 2026-10-20
Retracement ratio between two selected reference points
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.