1. Fibonacci Ratios
These are the key Fibonacci ratios used in trading:
| Ratio | Formula | Use in Charting |
| 23.6% | 1 ÷ 4.236 | Minor retracement |
| 38.2% | 1 ÷ 2.618 | Common retracement |
| 50.0% | Not a Fibonacci number, but widely used | Mid-point correction |
| 61.8% | 1 ÷ 1.618 | Golden Ratio (most significant) |
| 78.6% | √0.618 | Deep retracement level |
| 100% | Full retracement | |
| 127.2% | Extension beyond 100% | |
| 161.8% | 1.618 (Golden Ratio) | Major extension |
| 261.8%, 423.6% | Extended projections for strong moves |
The Golden Ratio (0.618) and its inverse (1.618) are considered the most powerful.
a) Interpretation:
| Retracement Level | Meaning |
| 23.6% | Shallow pullback, strong trend |
| 38.2% | Minor correction |
| 50.0% | Medium correction, psychological level |
| 61.8% | Deep pullback, trend may reverse if broken |
| 78.6% | Very deep pullback, trend might be exhausted |
b) Key Fibonacci Ratios Used in Trading
The ratios used in trading are derived from the Fibonacci sequence and its mathematical properties. These ratios act as benchmarks for possible price reversals or continuations.
Commonly Used Fibonacci Ratios:
- 23.6% – Represents shallow retracements; typically seen in strong trends.
- 38.2% – Indicates moderate pullbacks; often a reliable support/resistance level.
- 50.0% – Not a Fibonacci number, but widely recognized due to its psychological significance.
- 61.8% – Known as the Golden Ratio; considered the most important level in retracement and extension.
- 78.6% – Deeper retracement; indicates weakening trend strength.
- 100% – Complete retracement of the original move.
- 127.2%, 161.8%, 261.8%, 423.6% – Used in Fibonacci extensions to project price movements beyond the original trend.