Fibonacci levels
How the grid is built from a finished move
Start with a move that has already ended. On the chart, mark the lowest point and the highest point of that move. Draw a straight line between them. The grid is built from that line, not from the current price. If the move is still running, the grid will keep shifting and it will not help you.
The tool divides the line into fixed parts. The three parts most people watch are 38.2 per cent, 50 per cent and 61.8 per cent. On a move from 1.0700 to 1.0900, the distance is 200 pips. 38.2 per cent of 200 is 76.4 pips, so that line sits 76.4 pips below 1.0900, at about 1.0824. The 50 per cent line sits 100 pips below, at 1.0800. The 61.8 per cent line sits 123.6 pips below, at about 1.0776.
The grid does not predict anything. It only shows where many people have drawn the same lines. Because so many watch those prices, orders often collect there. Price may pause or turn near a line, or it may pass straight through. The grid tells you where to look, not what will happen.
What the lines actually mark
A Fibonacci line is not a wall. It is a price where a large number of traders have placed orders. Some of those orders are buys, some are sells. The line itself does not know which way price will go. It only marks a level where activity may increase.
When price reaches a line, watch what it does next. If it slows down and reverses, the line has acted as a pause. If it moves through quickly, the line has done nothing. You do not need to guess in advance. You wait for the chart to show you a reaction, then you decide.
The same line can work on one day and fail on another. That is normal. The grid is a map of where people are watching, not a set of rules. Treat each line as a place to pay attention, not as a signal to buy or sell.
Reading the grid without guessing
After you draw the grid, do not act immediately. Let price come to a line. Then look for a second sign: a candle that closes away from the line, or a small range that breaks in one direction. The line alone is not enough. The reaction is what matters.
If price passes through a line and keeps going, move on. Do not redraw the grid to make the line fit. A line that has been broken has lost its meaning for that move. You can wait for a new move to finish and draw a fresh grid.
Brokers differ in how they round the levels, and some quote a spread on top of the price you see. Check your own platform for the exact figures. The levels you see on your chart are the ones that matter, because they are the ones other people are watching too.
A 100 pip move on EUR/USD, divided into three levels
| Step | Amount | Note |
|---|---|---|
| The move being measured | 100 pips | From a low of 1.0800 to a high of 1.0900 on EUR/USD. The difference is 0.0100, which is 100 pips. |
| 38.2 per cent level | 1.0862 | 38.2 per cent of 100 pips is 38.2 pips. Subtracted from the high: 1.0900 minus 0.00382. |
| 50 per cent level | 1.0850 | Half of 100 pips is 50 pips. Subtracted from the high: 1.0900 minus 0.0050. |
| 61.8 per cent level | 1.0838 | 61.8 per cent of 100 pips is 61.8 pips. Subtracted from the high: 1.0900 minus 0.00618. |
| Value of one pip on one standard lot | about ₱580 | One pip on one standard lot of EUR/USD is 10 units of the quote currency, converted at the current rate. At roughly ₱58 to one unit, that is about ₱580. The rate changes, so the peso figure changes with it. |
| Value of one pip on 0.10 lots | about ₱58 | 0.10 lots is one tenth of a standard lot, so one tenth of ₱580. |
Brokers differ in how they round the levels, and some quote a spread on top of the price you see. Check your own platform for the exact figures.
Doing it once, step by step
These steps show you how to draw a Fibonacci grid on a finished move and how to read it once price returns to a line. Do them in order, on a demo chart first.
- 01
Find a completed move
Look for a clear swing low and a clear swing high that have already formed. The move must be finished, not still running. If you are unsure, wait for a new one. A finished move is the only base for a grid.
- 02
Draw the grid from low to high
Use the Fibonacci tool on your platform. Click the low, then the high. The lines will appear between them. On a move from 1.0700 to 1.0900, the 50 per cent line appears at 1.0800. Check that the levels match the percentages you expect.
- 03
Mark the three main lines
Note the 38.2 per cent, 50 per cent and 61.8 per cent levels. Write them down if it helps. These are the lines most people watch. Other levels exist, but start with these three.
- 04
Wait for price to reach a line
Do not act when price is far from a line. Let it come to one. When it arrives, watch the candles. A slow approach is different from a fast one. The speed tells you how much interest there is at that price.
- 05
Look for a reaction
A reaction is a candle that closes away from the line, or a small range that breaks. If price just touches the line and continues, there is no reaction. No reaction means no decision. You wait for the next line.
- 06
Move on if the line fails
If price passes through a line and keeps going, the line has done nothing. Do not redraw the grid to force a fit. Close the chart and wait for a new completed move. A failed line is information, not a mistake.
The mistake most people make here
The common mistake is to treat a Fibonacci level as a signal on its own. A line at 1.0850 does not mean price will turn there, and it does not tell you where to put a stop. The grid only shows where many people have drawn the same line, nothing more. Draw it on a move that has already finished, then wait for price to actually react before you decide anything. If price passes straight through, the level has done nothing and you move on.Check yourself
EUR/USD moves from 1.0700 to 1.0900. Where is the 50 per cent level?
The move is 200 pips. Half of that is 100 pips. Subtracted from the high of 1.0900, the 50 per cent level is 1.0800.
On 0.10 lots of EUR/USD, what is one pip worth in pesos if one unit of the quote currency is ₱58?
One pip on one standard lot is 10 units, so 10 times ₱58 is ₱580. On 0.10 lots that is one tenth, which is ₱58.
A move runs from 1.0820 to 1.0870. What is 61.8 per cent of it in pips?
The move is 50 pips. 61.8 per cent of 50 is 30.9 pips, so the level sits 30.9 pips below the high, at about 1.0839.
Questions that come up next
How do I know which two points to use for the grid?
Use a move that has already finished. Mark the lowest point and the highest point of that move, then draw the line between them. Do not use the current price as an endpoint. If the move is still running, the grid keeps shifting and the lines mean nothing.
What do the three lines at 38.2, 50 and 61.8 per cent actually show?
They show prices where a large number of traders have placed the same lines. Orders often collect there, so price may pause or turn near one. The lines do not say which way price will go. They only mark places worth watching.
How much is one pip on EUR/USD in pesos?
One pip on one standard lot is 10 units of the quote currency. If one unit is ₱58, that is ₱580. On 0.10 lots it is one tenth, or ₱58. Your broker's spread sits on top of that figure.
What should I do when price reaches a line?
Wait. Let price come to the line, then look for a second sign such as a candle that closes away from it. The line on its own is not enough. The reaction is what matters, and it may not come.
What if price passes straight through a line?
Then the line has done nothing for that move. Move on and do not redraw the grid to make the line fit. A broken line has lost its meaning. Wait for a new move to finish and draw a fresh grid.
Does the SEC Philippines approve Fibonacci levels or brokers?
The SEC Philippines regulates certain investment activities, but a chart tool is not something it approves. Rules and permissions vary, so check the current position yourself. This course gives no broker recommendations and no signals.
The words used on this page
- pip
- The smallest common step in a currency price. On EUR/USD it is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip.
- lot
- A fixed amount of the instrument you are trading. One standard lot of EUR/USD is 100,000 units, and smaller lots are fractions of that.
- spread
- The gap between the price you can buy at and the price you can sell at. It is set by your broker and varies between them.
- candle
- A mark on the chart that shows the open, high, low and close of one period. A candle that closes away from a line is one kind of reaction.
- reaction
- What price does when it reaches a line, such as slowing down, turning, or passing through. It is the chart's answer, not a prediction.
- grid
- The set of horizontal lines drawn from one finished move. It divides that move into fixed parts and marks where many people watch.
What to take away
- Draw the grid on a move that has already ended, from its low to its high.
- The lines mark where many traders watch, not where price must turn.
- Wait for price to react at a line before you decide anything.
- If price passes through, the line has done nothing and you move on.