# Fibonacci pullback: a strategy to learn and test | DT Academy > In a trend, wait for the pullback to reach 38.2 to 61.8% and confirm. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Trend # Fibonacci pullback In a trend, a pullback often gives back part of the last swing before carrying on. You draw Fibonacci retracement levels from the swing low to the swing high (high to low in a downtrend) and treat 38.2%, 50% and 61.8% as zones to watch, not turning points, entering only when a confirmation appears there, best where a level lines up with old support or resistance. Beginner Forex, indices, gold, crypto, stocks Any session; trending markets H1, H4, D1 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ffibonacci_pullback) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ffibonacci_pullback) Example 01 ### Fibonacci pullback on a chart EURUSD · H1 38.2 to 61.8% swing, pullback, continue Zone, 38.2 to 61.8%: 1.0842 to 1.0868Entry: 1.0854Stop: 1.0797Target, 161.8%: 1.0978Sample candles, not market data The pullback reached the zone where the 61.8% level met old resistance, now support, and a rejection candle closed there. The stop sits beyond the start of the swing. ### The rules Setup A trending market: draw from the swing low to the swing high in an uptrend (high to low in a downtrend) Watch 38.2% to 61.8%, with 50% in the middle and 61.8% the golden retracement; many traders call 50% to 61.8% the golden zone Entry Enter when a confirmation appears in the zone, such as a rejection candle, ideally where the level meets old support or resistance Stop Beyond the next Fibonacci level, or beyond the start of the swing Target The prior high or low, or an extension such as 161.8% Manage The sources leave management open: set your own ### Common mistakes - Treating levels as exact. They are zones to watch, not prices that must turn. - Entering without confirmation. Price passes through levels all the time. - Drawing on a minor swing. And redrawing it after entry until it fits. - Believing the levels predict. The sources themselves say they do not reliably predict on their own. ### When it's off - Call it off if price closes beyond the start of the swing - Skip it in a sideways market ### Words to know Fibonacci retracement A tool that measures how deep a pullback is as a fraction of the leg (0.382, 0.5, 0.618, 0.786). Draw it low to high on a leg up and high to low on a leg down, on the leg that broke structure, usually wick to wick. Golden zone The part of a pullback many traders watch most, commonly the 0.5 to 0.618 retracement; the tighter golden pocket (0.618 to 0.65) and a deeper 0.618 to 0.786 version exist too. It is a place to look, not a reason to enter: it needs structure and a trigger. Fibonacci extension Levels beyond the swing, such as 127.2% and 161.8%, used as targets. They are drawn either by stretching a retracement past 100% (two points) or by projecting a leg from a pullback (three points), and the two give different prices. Swing high and swing low A swing high is a peak with lower highs on both sides; a swing low is a dip with higher lows on both sides. It only counts once the candles to its right have closed. Support and resistance Zones, not single prices, where buyers (support) or sellers (resistance) have shown up before. A level is broken when a candle closes beyond it, and a broken level is often watched from the other side. Confluence A Fibonacci level lining up with another reason at the same price, such as old support. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - What makes a swing significant to you, on which timeframe, and do you draw from wicks or bodies? - Which level or zone do you act on, and did you decide that before the trade? - What confirmation must appear before you enter? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ffibonacci_pullback) ## From DT Academy - [The golden zone](https://www.thedtterminal.com/academy/the-golden-zone) - [Market structure](https://www.thedtterminal.com/academy/market-structure) ## What testing exists Research disagrees on whether price reacts more at Fibonacci levels than anywhere else, and the broker sources say the levels do not predict on their own. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [Fibonacci retracements (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/chart-analysis/chart-annotation-tools/fibonacci-retracements), StockCharts ChartSchool - [Fibonacci trading strategy (opens in a new tab)](https://www.cmcmarkets.com/en-gb/technical-analysis/how-to-trade-fibonacci), CMC Markets - [Fibonacci retracement: what is it and how do you use it (opens in a new tab)](https://www.ig.com/en/trading-strategies/fibonacci-retracement--what-is-it-and-how-do-you-use-it-in-tradi-230602), IG - [Using Fibonacci retracements and extensions (opens in a new tab)](https://www.oanda.com/us-en/skills-and-insights/education/technical-analysis/indicators-and-oscillators/using-fibonacci-retracements-and-extensions/), OANDA - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. [Risk disclosure](https://www.thedtterminal.com/risk-disclosure) --- Risk disclosure: Futures, forex and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. [Read the full risk disclosure](https://www.thedtterminal.com/legal/risk-disclosure). 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