How the levels are worked out
Retracements are measured back from the end of the move towards its start. On a move up, the 38.2% retracement is the high minus 38.2% of the distance from the low to the high; on a move down, it is the low plus 38.2% of the move. The ratios come from 61.8%: 38.2% is 61.8% squared, 23.6% is 61.8% cubed and 78.6% is its square root. 50% is drawn with them by convention.
Extensions are measured from the start of the move and sit beyond its end: on a move up, the 161.8% extension is the low plus 161.8% of the move, which is 61.8% of the move above the high. 127.2% is the square root of 161.8%, and 261.8% is 161.8% squared. Charting tools do not all place extensions the same way, so compare where your chart puts its 100% line before comparing numbers.
A worked example
The values loaded here are example gold prices: a move up from a swing low of 3,950.00 to a swing high of 4,050.00, 1,000 pips or $100.00 of price. The retracements fall at 4,026.40 (23.6%), 4,011.80 (38.2%), 4,000.00 (50%), 3,988.20 (61.8%) and 3,971.40 (78.6%), from 236 to 786 pips below the high. The extensions sit at 4,077.20 (127.2%), 4,111.80 (161.8%) and 4,211.80 (261.8%). Switch the move to down and every level mirrors around the middle of the move, 4,000.00.
A convention, not a forecast
Fibonacci levels are ratios applied to a move that has already happened, a convention traders watch. Nothing on this page says price will stop, turn or reach any of them. The levels also depend on the swing you choose: two traders who pick different swings on the same chart get different levels.
Next to a signal
If you follow signals, the levels that decide the trade are the signal’s own entry, stop and targets. A Fibonacci level near a target can help you read the chart, but it is not a reason to move the stop or change the plan. To see what a signal risks against what it targets, use the risk reward calculator, and size it from its stop with the lot size calculator.
Questions
What are the Fibonacci retracement levels?
23.6%, 38.2%, 50%, 61.8% and 78.6% of the move, measured back from its end. 50% is included by convention; the others come from 61.8% and its powers and roots.
How do I calculate a Fibonacci retracement?
Take the move from the swing low to the swing high, multiply it by the ratio and subtract the result from the high. On a move from 3,950.00 to 4,050.00, the 61.8% level is 4,050.00 minus 61.80, which is 3,988.20. On a move down, add it to the low instead.
What is the difference between a retracement and an extension?
A retracement sits inside the move, part of the way back towards its start. An extension sits beyond its end: here the 161.8% extension is the start of the move plus 161.8% of its size.
Which swing high and low should I use?
The calculation cannot choose for you. Take the swing that matters on the timeframe you trade, and remember that a different swing gives different levels.
Every closed signal is on the record
The results page lists each closed VIP signal with its entry, stop, targets and outcome, stops included.
Ready to join? Compare the VIP plans: £89 a month, or £540 paid once a year.