This is an ordinary human desire to simplify everything. It is inherent to traders. Therefore, the multiples of a hundred with two zeros at the end are so attractive to the crowd. It is at levels like 1. And, it is unknown who will win. When trading intraday, there is increased activity at certain price values. Near the levels of 00, we have already talked about. It is clear that they attract attention.
Examples: 1. Why is there a lot of forex orders on levels 20, 50, 80? The point is, again, in psychology. Agree, when half the job is done, it becomes much easier to work, right? Same thing with the price. Regarding the 20 and 80 levels, the situation is similar. While quotes did not reach, for example, 1.
But, when the barrier 1. Naturally, we are now talking about the psychological point of view. The situation is similar to the level of In general, round numbers such as Most traders will often assign a higher degree of strength to the more rounded-intervals. Where traders can really find value with these levels is when prices may have resisted or been supported there in the past.
Key levels in forex should be assessed in line with the current trend and whether there is secondary technical suggestions in favor of the trade. Below are the advantages and limitations of psychological levels:. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances.
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Such basic price levels are the most attractive from the point of view of human psychology. They become the battleground for bulls and bears, regrouping and reallocation of resources often occurs there.
As a rule, prices at which the large foreign exchange or options are set are "00" levels. By the time of expiry closing , the optional price of the instrument tends to catch up with the price of the spot market, so the presence of large options causes speculative price jumps in the area of basic prices.
Large marketmakers also take this information into account and when prices approach the "00" level, the volumes and number of transactions from their side increase sharply. They create artificial protection at 00 levels, and to enable a financial instrument to overcome such a price, you need not only strong fundamentals, but also the psychological desire of market participants to move to other trading levels. Lucky 5 strategy: characteristics of the trading system. This technique is based on working out the actual trading impulses on the basic price levels with simultaneous filtering them on higher timeframes, using small trailing stop to transfer transactions to breakeven with a minimum profit.
We get approximately the following picture:. We trade only if the direction of the last hourly candle H1 coincides with the direction of the daily candle D1. Open orders strictly in the direction of the candle. Setting: take-profit — 5 points, stop-loss — 10 points.
When the first order is triggered, we manually transfer the order to breakeven after 3. Only trailing stop works further. No additional indicators are commonly used. The author of the strategy recommends to stop trading at getting 10 points of profit, but this is up to the trader.
Important recommendations when trading under Lucky 5 strategy. Sometimes, the template of the Lucky 5 strategy comes with an additional "basement" indicator ASH AbsoluteStrengthHistogram , which acts as an additional filter. Trading orders should be set if the color of the indicator bar chart is the same as that of the daily and hourly candle. ASH readings help ride out the possible temporary rollbacks of the price if the order was triggered before the deal was transferred to breakeven.
Indicator bar chart allows to accurately identify the prevailing direction. It should be understood that the levels of activity and accumulation of mass are visible to market makers, so often the price a little, only by points, fails to reach the "00" level and reverses. In addition, requotes at the levels with lots of orders often lead to serious losses. The Lucky 5 strategy is an interesting option of trading low-volatile pairs within the day, relying solely on mathematical logic and psychology of market behavior.
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How to trade Forex & CFDs effectively with all necessary knowledge and highly effective strategy that can offer 90% Win Rate if used correctly. This article will cover the following key areas about psychological levels and round numbers in forex trading: Psychological level definition. Trade a wide selection of Forex pairs with tight spreads, fast execution and flexible position sizing.