Glossary Term

Fibonacci Retracements

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You may remember the Fibonacci sequence from math or biology class. It’s named after Leonardo Fibonacci, a mathematician who as far back as the 13th century, observed that a certain integer sequence can be found everywhere in nature, from the way that plants grow, to shell spirals, to ratios between different parts of the human body. In the Fibonacci series, each number is the sum of the previous two (e.g 0, 1, 1, 2, 3, 5, 8, 13). It is used in trading by technical analysts to plot support and resistance levels over price action that conform to Fibonacci’s series. The idea is that when an asset suddenly rides, as it inevitably cools off and begins to retrace, it tends to settle at price levels that are in keeping with the Fibonacci ratios. These are 23.6%, 38.2%, 50%, 61.8% and 100%.

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