The common ratios
The ratios most often used are 23.6%, 38.2%, 50% and 61.8%, sometimes 78.6%. Most come from mathematical relationships within a number series called the Fibonacci sequence. 50% is not a Fibonacci ratio, but it is placed alongside the others because it is the wave's midpoint and many people watch it.
The calculation on a wave
The levels depend on your choice
Every level is calculated from two points you choose: the start and end of the wave. If someone else decides the wave began at 10.50 rather than 10.00, their 61.8% level becomes 15.00 − 4.50 × 0.618 ≈ 12.22, not 11.91. Same stock, same chart, different levels.
And with five levels close together, price will usually be near one of them at any given moment. So if price pauses at a level, it may be coincidence, or it may be because many people watch the same number. Neither is guaranteed.
Draw the wave yourself
Open any stock chart on FoudaLens, use the Fibonacci tool on the last clear wave, then move the starting point and see how far the levels shift.
Check yourself
1. A wave from 20 to 30. Where is the 50% level?
2. Why can two people draw different Fibonacci levels on the same stock?
Summary
- Each level = top − (wave × ratio); the common ratios are 23.6%, 38.2%, 50% and 61.8%.
- The levels depend on the two points you chose for the wave.
- They describe the size of a pullback, not a certain floor for price.