Fibonacci Retracement refers to a drawing tool that plots horizontal lines at key percentage levels (derived from the Fibonacci sequence) between a significant price high and low. These levels (commonly 23.6%, 38.2%, 50%, 61.8%, 78.6%) indicate potential support or resistance zones where price may stall or reverse. Traders draw a Fibonacci retracement on a chart to predict how far a pullback might go before the prevailing trend resumes. Relevance to EAs: Fibonacci levels are frequently integrated into automated trading strategies. Forex robots can calculate these retracement levels automatically after a strong price move and use them as decision points – for instance, an EA might place buy orders around the 61.8% retracement level in an uptrend, anticipating it as a support where price could bounce. Similarly, take-profit or stop-loss placements can be based on Fibonacci lines (e.g. taking profit just before a 100% or 161.8% extension). Because Fibonacci retracements are a predictive tool for where price might reverse, an EA can use them in trend-following or mean-reversion systems to improve timing for entries and exits. The key for automated systems is that Fibonacci levels quantify pullbacks, allowing the robot to react consistently to proportional price corrections rather than arbitrary price levels.

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