Fibonacci retracement levels

The Fibonacci retracement tool places percentage marks between the start and end of an impulse: 23.6%, 38.2%, 50%, 61.8% and 78.6% are the most used. It takes its name from ratios in the Fibonacci number sequence; 50% is not actually one of them, but tradition added it to the list. In an uptrend the tool is drawn from swing low to swing high, and the levels mark possible pause areas.

Why do these levels work — when they work? The honest answer: partly market psychology, partly self-fulfilment. When thousands of participants draw the same tool over the same swings, decisions cluster around those areas. You need no claim about "the mathematics of the universe"; being widely watched reference points is enough for them to leave marks on a chart.

The usage discipline is inherited from level 3: these are ZONES, not thin lines, and on their own they are weak evidence. A Fibonacci level draws its strength from coinciding with other evidence — say, the 38.2% mark landing on an old resistance area, a role-reversal candidate. That coincidence is called confluence, and it will earn its keep alongside targets in the next lesson. Price skipping one level and travelling to the next is not the tool "failing" — it is ordinary behaviour.