Fibonacci retracement

The trader picks a swing low and a swing high, and the tool draws horizontal lines at fixed percentages of that range: 23.6%, 38.2%, 50%, 61.8% and 78.6%. Most of these ratios derive from the Fibonacci sequence, while 50% is included by convention. The lines mark where a pullback inside a trend might pause before the trend resumes. Extensions beyond 100% are used to set targets.

Fibonacci levels are among the most widely drawn tools in crypto analysis, and the zone between 61.8% and 65%, nicknamed the golden pocket, is a favourite area for entries. When many traders watch the same level, orders cluster there, which can make the level react regardless of any mathematical meaning.

That self-fulfilling quality is also the weakness. Results depend on which high and low are chosen, different traders draw different grids, and there is no solid evidence that the ratios have predictive power by themselves. They work best as a map of possible reactions, not as forecasts.