Enter the peak price, the difference between the peak and trough price, and the Fibonacci ratio into the calculator to determine the Fibonacci retracement level.
Fib Retracement Formula
The following formula is used to calculate the Fibonacci retracement levels in trading.
FR = P ± (d * F)
Variables:
- FR is the Fibonacci retracement level
- P is the peak price
- d is the difference between the peak price and the trough price
- F is the Fibonacci ratio (0.236, 0.382, 0.500, 0.618, or 0.786)
To calculate the Fibonacci retracement level, first find the difference between the peak price and the trough price. Then multiply this difference by the Fibonacci ratio. If you are calculating a retracement level above the peak price, add this result to the peak price. If you are calculating a retracement level below the peak price, subtract this result from the peak price.
What is a Fib Retracement?
A Fibonacci retracement is a technical analysis tool used by traders to identify potential levels of support and resistance in the price of a financial asset. It is based on the key numbers identified by mathematician Leonardo Fibonacci in the 13th century. The retracement levels are drawn on a chart by taking two extreme points (usually a peak and a trough) and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. Traders use these levels to anticipate where the price may potentially reverse.
How to Calculate Fib Retracement?
The following steps outline how to calculate the Fibonacci Retracement using the formula FR = P ± (d * F).
- First, determine the peak price (P).
- Next, determine the difference between the peak price and the trough price (d).
- Next, choose a Fibonacci ratio (F) from the options: 0.236, 0.382, 0.500, 0.618, or 0.786.
- Finally, calculate the Fibonacci retracement level (FR) using the formula FR = P ± (d * F).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
Peak price (P) = $100
Difference (d) = $20
Fibonacci ratio (F) = 0.618
