The ratio of 61.8% is considered the golden ratio and it is the value obtained when you divide one Fibonacci number by the next Fibonacci number (for example, 89/144 = 0.6180). The Fibonacci levels for each line are expressed as a percentage for the retracement and they are: 0.0, 23.6, 38.2, 50, 61.8, and 100% (other levels may also be used). Afterward, each Fibonacci level is presented as a horizontal line, which intersects with the trend line. When plotting it, you should draw a line from the lowest price to the highest price (or vice versa, if it is a downward trend) and the levels will be placed automatically.īefore plotting the Fibonacci lines on your chart, set a trend line connecting two extreme price points, such as the lowest and the highest prices for the period. The set-up of this indicator is a straightforward process since it is a built-in tool in most trading platforms. On your chart, you will see the indicator as different lines for different levels. In the Fibonacci sequence, each number of the sequence is the sum of the previous two – 0,1,1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on. The Fibonacci retracement shows percentage retracements in accordance to the Fibonacci sequence numbers. The Fibonacci retracement indicator uses numbers pointed out by Leonardo Pisano (known as “Fibonacci”), a mathematician from the 13th century. The Fibonacci retracement indicator is based on so-called retracements, which are periods in which the price moves against the trend, after which it moves back in the trend direction.
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