Fibonacci retracement explained: 38.2%, 50%, 61.8%

Fibonacci retracement projects horizontal levels at 38.2%, 50% and 61.8% of a prior swing — the levels markets often pause at on a pullback.

Where the numbers come from

The Fibonacci sequence (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, …) generates a golden ratio (φ ≈ 1.618) and its reciprocal (≈ 0.618). The 38.2% level comes from φ² (≈ 0.382). The 50% level is not Fibonacci — it's just the midpoint, included by convention because markets respect halves. The 61.8% level is the reciprocal of φ.

The technical-analysis tradition draws horizontal rays at these percentages of the most recent swing. The premise: market psychology produces self-similar pauses near these ratios.

Why they work (when they work)

The "do they work?" debate is decades old. The honest answer: they work as much as any horizontal line attracts orders. Enough traders watch them that a pullback to 61.8% becomes a real cluster of resting bids. The level matters because people believe it matters. That self-fulfilling element is also why the levels fail spontaneously — beliefs shift, the level no longer holds.

How Signodex uses Fibonacci

Signodex renders 38.2 / 50 / 61.8 retracements on every chart window where a clear swing is visible. The AI Deep Analysis cites them when relevant ("The pullback has held at the 61.8% level of the prior rally"), never as a trade signal on its own.