Fibonacci Levels
Fibonacci Support & Resistance (How to Trade Retracements & Targets)
What the Fibonacci sequence is, how traders use Fibonacci retracements to find support/resistance in trending markets, how to mark A–B–C swing points in uptrends and downtrends, and how Fibonacci expansions (projections) define logical profit targets using FE 61.8, 100, and 161.8.
Support & Resistance
Fibonacci
Department
OTM Academy
Category
Technical analysis
What Are Fibonacci Support & Resistance Levels?
You might wonder how to find support and resistance using Fibonacci levels in day trading. The logic is straightforward.
Fibonacci numbers—first organized by the 13th-century Italian mathematician Leonardo Fibonacci—sit at the core of many technical indicators. These ratios help traders perform precise technical analysis and locate potential turning points in price.
The Fibonacci Sequence
The Fibonacci sequence is a series of numbers where every value is the sum of the last two:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, …
These numbers (and the ratios between them) are widely used to calculate targets and entry zones when trading stocks, commodities, and especially Forex pairs.
Fibonacci tools work best in trending markets, and the grid should always be drawn from left to right on the chart.
Fibonacci retracement levels mark potential reversal zones where traders may look for entries during pullbacks within a trend.
Fibonacci Retracements in Trending Markets
Retracement levels are applied to a completed swing—either down or up:
They highlight where a corrective move might end.
They help traders time entries back in the direction of the main trend.
Commonly watched retracement levels are 38.2%, 50%, and 61.8%.
In practice, you mark the swing with two anchor points (A and B), then watch how price behaves as it pulls back toward the key Fib levels, searching for confirmation to rejoin the trend.
Using Fibonacci in Downtrends and Uptrends
Whether the market is falling or rising, the logic is the same: anchor the tool to the completed swing and watch for the pullback to finish at a key Fib level (C), where a new trend leg may begin.
Uptrend Example (A–B–C Structure)
In an uptrend you flip the anchors and draw Fibonacci from low to high (still left to right):
Point A = the last significant swing low.
Point B = the swing high.
Point C = the retracement level where the pullback is likely to finish and a new upward move may start (potential entry zone).
When price respects one of the Fib levels at C and shows confirmation (e.g., rejection candles or momentum returning with the trend), traders use it as a structured entry area.
Fibonacci Expansions / Projections & Trading Platforms
Fibonacci Expansion / Projection tools provide potential profit targets once price has tested the starting point of the current move and continues in the same direction.
In a typical uptrend example (such as GBP/JPY):
Point 1 = the starting point of the move.
Point 2 = the highest point of the initial swing.
Point 3 = the end of the pullback (which often aligns with a retracement level).
From there, the main expansion targets are:
0.618 → FE 61.8
1.000 → FE 100.0
1.618 → FE 161.8
These projected levels act as logical zones for scaling out or closing positions.
Modern platforms like MetaTrader 5 make working with Fibonacci tools easy. MT5 offers:
Multi-language support.
Advanced charting and drawing tools, including Fib retracements and expansions.
Algorithmic/automated trading.
Highly customizable layouts to fit your style.
Live charts, news, and technical analysis features.
Wrap-Up:
Fibonacci levels turn raw trend swings into clear support and resistance zones and structured profit targets.
Identify the trend, anchor A–B correctly (high→low in downtrends, low→high in uptrends), watch for the pullback to stall at a key Fib level (C), and use expansions (FE 61.8, 100, 161.8) to map realistic take-profit areas—especially when combined with a professional platform like MetaTrader 5.
