What is a 61.8% retracement in Elliott Wave?
A 61.8% retracement is the most-cited Fibonacci pullback level in Elliott Wave, derived from the golden ratio (1/1.618 = 0.618). Wave 2 most commonly retraces 61.8% of Wave 1, providing a high-probability entry zone for traders positioning for Wave 3.
Full Explanation
The 61.8% retracement level (also written 0.618 or phi) is the single most-watched Fibonacci level in technical analysis. In Elliott Wave specifically, it's the most common terminal point for Wave 2 retracements of Wave 1. Mathematically, 0.618 is the inverse of the golden ratio (1.618 = phi). The level appears throughout natural systems — the spiral of a nautilus shell, the proportions of plant growth, the geometry of the human face — and shows up consistently in financial markets because collective investor psychology produces the same proportional reactions. Practically: in an uptrend, measure from Wave 1's low to Wave 1's high, then identify where 61.8% of that range falls. If Wave 2 terminates near that level, the count's Fibonacci proportion is on the most common path and Wave 3 is the next expected move.
- → Elliott Wave Theory Guide — the 5-3 pattern, rules, Fibonacci, wave degrees
- → How to Count Elliott Waves — 6-step process used on 108 instruments
- → Elliott Wave Fibonacci Guide — the 7 core ratios and how they're applied
- → Rules and Guidelines — the 3 absolute rules + 7 guidelines
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