Fibonacci Retracement
Horizontal levels drawn at set percentages of a prior price move, used to mark potential areas where a pullback may pause.
Formula
Retracement Level = High - (High - Low) x Ratio, where common ratios are 23.6%, 38.2%, 50%, 61.8% and 78.6%
Unit
%
In depth
The ratios derive from the Fibonacci sequence, except 50%, which is included by convention and has no Fibonacci basis at all — a detail that undermines any claim of mathematical necessity. No mechanism connects the sequence to market prices, and the levels' apparent relevance is best explained by how many participants draw the same lines on the same charts. The choice of which swing high and low to measure from is subjective, and different choices produce entirely different levels. The tool is described here as a convention for marking levels; it predicts nothing.
Worked example
A move from ₹462 to ₹534 spans ₹72. The 38.2% level is 534 - 0.382 x 72 = ₹506.50, the 50% level is ₹498, and the 61.8% level is 534 - 44.50 = ₹489.50.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Fibonacci Retracement” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.