Fibonacci retracement: how far will the pullback go?
Fibonacci levels measure how much of a move has been given back; the 38.2, 50 and 61.8 percent levels are zones where pullbacks often stop.
In the chart above you see a grey, dashed sloping line with dots at both ends. This is the leg Fibonacci is measured on: the last clear move price made from a low to a high (or from a high to a low). The horizontal lines on the left edge, such as ‘FIB 23.6%’, ‘FIB 38.2%’, ‘FIB 50%’ and ‘FIB 61.8%’, are levels showing how much of that leg has been given back.
When price pulls back a little after a strong advance, everyone asks the same question: ‘where will this pullback stop?’ Fibonacci levels give that question a framework. A shallow pullback that stops at 38.2 percent tells you the trend is strong. The 50–61.8 percent zone is the most watched area. A deep pullback below 78.6 percent says most of the move has been given back and the trend should be questioned.
Fibonacci's power does not come from magic ratios but from many people watching the same levels. That is why you should read the levels not on their own but together with other evidence: if a Fibonacci level also coincides with an old support or an average, that area is stronger.
The most important point is choosing the right leg. Which low you measure from and which high you measure to completely changes where the levels fall. Our system shows the leg by drawing it, so the answer to ‘measured against what?’ is visible on the chart.
How to read it
- Look at the leg first: which low and which high is the grey dashed line drawn between? The levels only mean something relative to this leg.
- Read the depth of the pullback: price stopping around 38.2 percent describes a strong trend, price sagging below 61.8 percent a weakening one.
- Look for confluence: if a Fibonacci level falls in the same zone as a support, a pivot or an average, that zone deserves more attention.
- Wait for a reversal sign when price reaches the level: a reversal candle or momentum recovering shows the level is working.
We measured
We compared our own Fibonacci calculation with TradingView. On the THYAO daily chart both ends of the leg matched exactly, and the difference across all seven levels was at most 0.12 TL. The same comparison also exposed a bug in our old calculation: levels were always measured from the top down, so when the last leg pointed down, 38.2 and 61.8 percent had swapped places. The calculation was fixed to follow the leg's direction.
Source: BBL evidence audit: THYAO 1 day, level-by-level comparison with TradingView's Fibonacci tool ·
Trap
The most common mistake is choosing the leg that gives the result you want. By measuring from different lows and highs you can make almost any price land on some Fibonacci level; then the levels say nothing. Use the last clear leg and do not change it. The second mistake is buying price at a level without confirmation: Fibonacci is a list of ‘places to watch’, not a buy order.
Tip
If the analysis card mentions ‘retracement depth’, that is how much of the last leg price has given back. Around 38.2 percent is a healthy rest; 78.6 percent and beyond means the trend has weakened seriously.
Glossary
- Leg
- The move from a clear low to a high (or the reverse) that Fibonacci is measured on.
- Retracement
- Price giving back part of its last move.
- Confluence
- Levels found by different methods falling in the same zone.
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See the Fibonacci leg and levels in an analysis →For information only, not investment advice.