Fibonacci retracements and extensions

What it is

Draw a Fibonacci retracement from a swing low to a swing high (for an uptrend). The common levels, 38.2%, 50%, 61.8% and 78.6%, mark how deep a pullback has gone. Many traders watch 50%–61.8% closely.

Extensions project beyond the swing, such as 127.2% and 161.8%, as possible targets for the next leg.

How to spot it

• Use a clear swing that started a move, not random points.
• Levels that line up with a zone or FVG are the ones that matter.

How to use it

• Look for entries where a retracement level meets a zone (see Premium, discount and OTE).
• Use extensions as targets for partial or full profit.

Common mistakes

• Drawing fibs on every swing until one fits.
• Treating a fib level as support with nothing else there.

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