Forex Fibonacci retracement and extensions calculator

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Fibonacci Retracement Levels

Price trends in financial markets do not move in straight lines. Upward trends do not always head straight up, and downward trends do not always head straight down. Instead, directional movements are often interrupted by price pullbacks in the opposite direction before continuing their main trend, known as corrections.

As an investor relying on technical analysis, you aim to follow the trend, waiting for the correction to end to enter trades with the main price movement direction. This is where the challenge lies: how far can the correction go? What is the right price to re-enter the market?

This is why Fibonacci retracement levels are used. The percentages (23.6%, 38.2%, 50%, 61.8%, 78.6%) are expected levels where the correction might end. Thus, these levels act as support and resistance points that can be relied upon when the price reaches them.

Fibonacci Extension levels

If the price surpasses the retracement levels without bouncing back, the ongoing price movement is likely not a corrective move but a directional one that will continue. Typically, if the price exceeds the 78.6% level without ending the correction, it suggests that the movement is not a correction but a new trend. In such cases, the price continues its direction beyond the 100% level, representing the starting point of the trend and the drawing. However, how far can the price extend after surpassing the 100% level?

This is where Fibonacci extension levels come into play. The percentages (127.2%, 161.8%, 261.8%) are the expected levels where the directional movement might stop and start a correction. Thus, these levels are considered support and resistance points that can be relied upon when the price reaches them. Using Fibonacci retracement and extension levels effectively can enhance your trading strategy by providing reliable points to enter or exit the market, improving your overall risk management and decision-making in the financial markets.