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In financial markets, the laws of retracement remain among the most undeniable forces. It is a rule of thumb that price will always retrace—whether in large moves or even within the smallest tick patterns, which often appear as a zigzag. However, the retracement pattern itself is never fixed; it remains uncertain and subject to anticipation. This uncertainty explains why traders rely on multiple Fibonacci levels, each carrying a certain probability of influence. In this discussion, we introduce a refined strategy that applies Fibonacci techniques to address the challenges of trading shortly after major economic event announcements. By combining retracement principles with event-driven market behavior, we aim to uncover more reliable entry and exit opportunities. Join to explore the full discussion and see how Fibonacci can be adapted to post-event trading.

Pioneered by the Italian mathematician Leonardo Bonacci (commonly known as Fibonacci) many centuries ago, the Fibonacci sequence has become one of the most influential tools in modern technical analysis. In mathematics, the sequence is simple: each number is the sum of the two preceding numbers (1, 1, 2, 3, 5, 8, 13, …). Yet its appearance in nature, architecture, and even human behavior has fascinated scholars for generations.

In financial markets, the Fibonacci sequence is applied through Fibonacci retracement levels—a method traders use to identify potential reversal or continuation zones during market corrections. The most commonly used retracement ratios are 23.6%, 38.2%, 50%, 61.8%, and 78.6%, each derived from relationships within the Fibonacci sequence. These levels act as psychological markers where traders anticipate price reactions, either pausing, bouncing, or reversing.

The principle behind retracement is that markets never move in a straight line. After a strong upward or downward move, prices typically pull back before resuming their trend. Fibonacci retracement provides a framework for measuring the likely depth of such pullbacks. For example a:

  • 38.2% retracement often suggests a shallow pullback in a strong trend.
  • 50% retracement (though not a true Fibonacci number) is widely used as a midpoint correction.
  • 61.8% retracement, known as the “golden ratio,” is considered the most critical level where major reversals often occur.

In trading practice, Fibonacci levels are rarely used in isolation. They become more powerful when combined with price action, support and resistance, moving averages, or event-driven market behavior—such as retracements that occur shortly after major news spikes.

Author: Clemence Benjamin

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