Fibonacci Analysis for CMT Level 2
Fibonacci analysis is a key component of the CMT Level 2 curriculum. It applies mathematical ratios derived from the Fibonacci sequence to identify potential support, resistance, and price targets.
Key Fibonacci Ratios
- 23.6%: Shallow retracement
- 38.2%: Moderate retracement
- 50.0%: Not a Fibonacci ratio, but widely used
- 61.8%: The "golden ratio" — most important level
- 78.6%: Deep retracement (square root of 61.8%)
Fibonacci Retracements
Retracements measure how much of a prior move has been retraced. The 38.2% and 61.8% levels are considered the most significant.
Fibonacci Extensions
Extensions project price targets beyond the original move:
- 127.2%: Common first target
- 161.8%: Major extension level
- 261.8%: Extended target
Harmonic Patterns
Advanced patterns that use specific Fibonacci ratios:
- Gartley: Uses 78.6% retracement
- Butterfly: Uses 127% extension
- Bat: Uses 88.6% retracement
- Crab: Uses 161.8% extension
Exam Preparation Tips
- Know the key ratios from memory
- Practice identifying retracement levels on charts
- Understand how Fibonacci combines with other tools
- Be familiar with harmonic pattern structures