Fibonacci levels
What you learn in 3 minutesFibonacci levels are a way of dividing one completed price move into fixed parts. On EUR/USD around 1.0850, the three lines most people watch sit at 38.2 per cent, 50 per cent and 61.8 per cent of that move. What they actually mark is where a large number of traders have placed the same lines, so price often pauses or turns near them. This lesson shows you how to draw the grid on a finished move and how to read it without guessing.
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.
The mistake 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.