Fibonacci Retracement vs Extension: What's the Difference?

Fibonacci retracement measures a pullback within an existing price swing, plotted between a recent significant high and low (a swing high and swing low, connecting to the trend structure concepts from the earlier group). Retracement levels fall between 0% and 100% of that swing, marking potential areas where a pullback might pause before the prior move potentially resumes.

Fibonacci extension, by contrast, projects potential levels beyond the original swing (beyond 100%), used to estimate where price might travel if the prior trend resumes after a pullback, or to identify new potential areas of interest once price moves beyond its prior historical high or low, where traditional support/resistance history doesn't yet exist.

Retracement is typically applied while a pullback is actively developing within an existing trend, to gauge potential areas where that pullback might conclude. Extension is typically applied once a retracement has completed and the prior trend appears to be resuming, to estimate potential areas of interest for the continuing move.