Fibonacci Retracement
Horizontal lines at 23.6%, 38.2%, 50%, 61.8% of a price swing — common support/resistance targets.
Definition
Fibonacci retracements are horizontal lines drawn at ratios derived from the Fibonacci sequence (23.6%, 38.2%, 50%, 61.8%, 78.6%) of a prior price swing. They mark common areas where a pullback may find support (in an uptrend) or resistance (in a downtrend). Their predictive power is more 'self-fulfilling prophecy' (because so many traders watch them) than mathematical destiny, but combined with structure and volume they remain a staple of price-action trading.
Formula
Given swing low L and swing high H:
Retracement_x% = H - (H - L) * x%
23.6% level = H - 0.236*(H - L)
38.2% level = H - 0.382*(H - L)
50% level = H - 0.500*(H - L)
61.8% level = H - 0.618*(H - L)
78.6% level = H - 0.786*(H - L)Worked example
NVDA rallies from $400 to $500. A pullback brings the 38.2% retracement to $500 - 0.382*100 = $461.80, the 50% to $450, the 61.8% to $438.20. A long entry near $450 with a stop just below $438 is a popular swing-trade setup.
How ARIA Analyst uses it
ARIA auto-detects significant swings (using ATR-filtered ZigZag) and overlays Fibonacci levels in the Trade Setup module to suggest entry zones.
Related terms
Exponential Moving Average (EMA)
A moving average that weights recent prices more heavily — faster than the SMA.
Bollinger Bands
A volatility envelope: 20-period moving average plus and minus two standard deviations.
Average True Range (ATR)
A volatility measure based on the daily true range, used widely for stop placement and sizing.
Ichimoku Cloud
A multi-component Japanese indicator giving trend, momentum and support/resistance at a glance.
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