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Fibonacci retracement is a technical tool that marks potential support and resistance levels where a price pullback may pause or reverse. After a strong move, you plot horizontal lines at key ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) drawn from swing low to swing high, or vice versa. Traders watch these zones for possible re-entry into the trend. Levels are guides, not guarantees, so they work best confirmed by price action.

The most-watched levels are 38.2%, 50%, and 61.8%, with 61.8% (the “golden ratio”) considered especially significant. The 50% line isn’t a true Fibonacci number but is included because markets often retrace about half a move. Shallow 23.6% pullbacks signal strong momentum, while deep 78.6% retracements suggest the trend may be weakening. No single level is guaranteed to hold.

Identify a clear, completed price swing. In an uptrend, click the swing low and drag to the swing high; in a downtrend, drag from high to low. The tool auto-plots the ratio levels between those two points. On the WrPro platform the Fibonacci tool snaps to your chosen anchors. Use obvious, significant swing points, use consistent timeframes, and avoid forcing the tool onto minor, unclear moves.

Fibonacci levels often coincide with reaction zones, partly because so many traders watch them, creating a degree of self-fulfilling behaviour. However, they are probabilities, not certainties, and prices frequently overshoot or ignore them. They work best as one input among several rather than a standalone signal. Because CFDs are leveraged, losing trades can exceed expectations, so always confirm setups and manage risk with stops.

Retracement measures how far price pulls back against the prevailing trend, using levels between 0% and 100% to find potential entry or support zones. Extension projects how far price may travel beyond the original move, using levels above 100% (such as 127.2%, 161.8%, 261.8%) to set profit targets. In short, retracements help you enter; extensions help you decide where to exit.

Frequent errors include drawing from unclear or minor swing points, switching timeframes to force a level to “fit,” and treating a level as a guaranteed reversal. Traders also overload charts with too many Fibonacci sets and enter without confirmation. Better practice is to use significant swings, wait for supporting price action or other tools, and always place a stop-loss, since leveraged CFD losses can mount quickly.