How it works?

Fibonacci trading levels are often used as important support or resistance levels (or turning points) of a price. This is because numbers in the sequence are frequently found in nature, which many traders believe in their relevance in the financial markets as well. In trading, the Fibonacci levels are represented by the following retracement levels: 23.6%, 38.2%, 61.8%, 78.6%, 161.8%, 261.8% (a 50% retracement levels and 100% are also often used although they are not official Fibonacci levels).

For example, a EUR/USD price of 1.3200 can retrace by 23.6% to 1.0084 which can be used as a support to buy at. Consequently, these levels can be also used as a stop loss or take profit levels.