Stock Market Glossary

Fibonacci retracement

Chart technical tool for determining possible supports and resistances.

In brief: Chart technical tool for determining possible supports and resistances.

Meaning in practice

Based on the Fibonacci sequence, retracement levels (typically 23.6%, 38.2%, 50%, 61.8%) are drawn between a price high and low. Traders use them as clues to possible pullback targets in trends.

Context for investors and traders

For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.

How to use this in practice

Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.

What to keep in mind

Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.

What does Fibonacci retracement mean in simple terms?

Chart technical tool for determining possible supports and resistances.

When is this term relevant to investors?

Assess the term together with price, costs, position size and a predefined loss limit. That turns a market observation into a traceable framework rather than an automatic trading rule.

What should I check before acting on Fibonacci retracement?

Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.

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