Fibonacci retracements are a technical analysis tool used by traders to identify potential support and resistance levels in financial markets. Based on the Fibonacci sequence, the key retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 100%, which traders use to predict possible reversal points after a price movement. By plotting these levels on a price chart, traders aim to anticipate where a price might pull back before continuing in the direction of the trend, thereby making informed trading decisions.