Trading Psychological Whole Numbers
Trading Psychological Whole Numbers explained by professional Forex trading experts the “Trading Psychological Whole Numbers” FX trading team.
Trading Psychological Whole Numbers
There are many different ways of looking at support and resistance, with few as compelling as the study of ‘psychological whole numbers.’
If you’ve been trading on charts for long enough, you’ve surely noticed the odd behavior that prices will have a tendency to exhibit when a ‘round’ number (prices such as .9900 or .9800 on AUDUSD) is seen. Below is a picture of the Aussie-Dollar’s recent struggle to get over the ‘parity’ level.
Things get weird at this exchange rate.
As human beings, we have a tendency to value simplicity, and our own internal psychology plays a large role with the odd price behaviors that may be exhibited at these ‘psychological levels.’
Let’s walk through a simple example:
If someone were to ask you how much you spent on your computer, you’d likely respond with an amount rounded to the nearest hundred (‘ah, about $800,’ or ‘I paid $900.’) Sure, you can give an exact answer like Six-hundred-and-thirty-nine dollars and ninety-six cents; but that doesn’t really make any sense. If I had asked the question, I probably don’t care about the $39.96; I just wanted a ballpark idea for how much you paid for the computer.
Out of simplicity, most people (most of the time) will automatically round to the nearest whole number.
This happens in trading too.
Traders looking to sell the AUDUSD currency pair place a stop at an even 1.0000; not imagining that the price might come into play shortly thereafter.
What are the whole numbers?
Traders will often call these whole number intervals ‘double-zeros,’ as these prices are at even numbers such as 1.31000 on EURUSD, 1.57000 on GBPUSD or 132.00 on GBPJPY. The chart below will identify the ‘Double-Zero’s’ on the current EURUSD chart.
Trading Psychological Whole Numbers Conclusion
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