Fibonacci retracement levels mark statistically common pull-back depths inside a trend. The 61.8% (golden ratio) is the most-watched.
When to use it
After a clear impulsive leg, mark the swing-high to swing-low and treat 38.2 / 50 / 61.8 as buy-the-dip zones in an uptrend.
Formula
Retracement Level = High − (High − Low) × Fibonacci Ratio (0.236, 0.382, 0.5, 0.618, 0.786).
Worked example
Swing high 1.1000, low 1.0800. 61.8% retrace = 1.1000 − 0.0200 × 0.618 = 1.08764.
Are Fib levels self-fulfilling?
Largely yes. Their power comes from millions of traders watching the same numbers - actions at 61.8% feed the prophecy.