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# Fibonacci retracement

Fibonacci retracements are a method of technical analysis for determining support and resistance levels. They are

named after their use of the Fibonacci sequence.

## Fibonacci retracement is based on the idea that markets will

retrace a predictable portion of a move, after which they will continue to move in the original direction.

Fibonacci retracement is created by taking two extreme points on a chart and dividing the vertical distance by

the key Fibonacci ratios. 0.0% is considered to be the start of the retracement, while 100.0% is a complete reversal to the original part of the move. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels Fibonacci ratios:

Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence. The key Fibonacci ratios are 0%, 23.6%, 38.2%, 50%, 61.8% and 100%.  The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example, 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180. The 0.382 ratios is found by dividing any number in the sequence by the number that is found two places to the right. For example, 34/89 is approximately 0.3820. The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example, 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180.

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