Fibonacci Retracement is a popular technical analysis tool used by traders to identify potential support and resistance levels, and to predict the extent of a price correction within an existing trend. It is based on the Fibonacci sequence, a series of numbers where each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13...). When applied to trading, the tool uses horizontal lines drawn at specific Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) between two extreme points, typically a swing high and a swing low. The idea is that after a significant price move, the price will often retrace a predictable portion of that move before continuing in the original direction. Traders use these retracement levels to identify potential entry points for continuation trades or to set profit targets. For example, in an uptrend, a pullback to the 38.2% or 50% retracement level might be considered a good buying opportunity. While not a standalone tool, Fibonacci Retracement, when combined with other technical indicators and price action analysis, can significantly enhance a trader's ability to pinpoint optimal trading levels and manage risk.