It is for this reason that it is vital for traders to take advantage of the first bounce off the round number
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since it is at this point that the number of orders is the greatest and produces the
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biggest value. The entire market was totally absorbed by this figure. A good example of this occurred in curcio 2005 when the USD/CAD currency pair found support repeatedly at 1.2000.
Traders
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are constantly looking to make certain that they are seeing this first bounce. Another example occurred in the dennis
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part of 2006 when the EUR/USD found support at about 1.2700. Traders that specialized in round number entry points
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were able to gain some great rewards. Every time the exchange rate achieves the round number support level orders are executed. Longer trading time frames are ineffective because they can often hide multiple bounces within a single candle
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spike. This even was cause for much celebration as it was considered a major milestone.
In 1999 the success of
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the Dow was one of the most publicized events of the year. The fact that these orders do tend to congregate around numbers
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creates a major strategy for many traders and many traders lean on this as a major trading technique. Humans also gravitate to numbers that are factors of 10. Banks enjoy substantial commissions when they implement customer orders around these round numbers as large pools of orders tend to accumulate. This is what is referred to psychological support because it is not based on any prior price activity. Why The Interest In Round Numbers. As this occurs, the pool of orders that
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trade
created the support or resistance level diminishes. The time frames involved in day trading are typically very short.
Trading requires constant vigilance for success unless you use an automated trading system. As long as people are involved in trading this phenomenon will be present. The investors
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that were driven into a frenzy when it hit 10,000 had little to show for it some years later. We are immutably drawn to round numbers and numbers that end in forex newsletters zero. This phenomenon is com to all trading markets but is especially prevalent in the currency market. About seven years later the Dow was trading at only
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11,000. It occurs when we go to the market, joel the temperature, buy a piece of property or go to the gas station. You can learn lots more at /blog.
This happens because of the fact that the first bounce off of the round number support or resistance is usually the one that is the best and most profitable bounce. If
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multiple traders also place buy orders at $40 because it appears that the stock is a good buy at that level, the stock will encounter a large pool of buy orders. Theories abound that humans have developed a numeric systems
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called "base 10" because they have 10 fingers and toes.
An active trader can also trade the subsequent bounces although they tend to yield smaller profits. This
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often causes a large amount of buying activity and because buyers are outnumbering the sellers the value of the stock will rise rapidly. Financial news channels
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were running four hour specials extolling the event as the second coming. Round Numbers In Forex The profound
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influence of round numbers in the Forex marketplace should not be underestimated.
These round numbers play a major role in Forex trading. In
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1999 the Dow Jones Industrial Average hit the 10,000 mark for the first time. The Round Number Effect Investors and traders have a very strong tendency to enter orders that coincide with round numbers. Forex Trading -The Power of Round Numbers We are constantly
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rounding off numbers in our day to day activities. For example a trader may place an order on a specific stock when and if it falls to a $40 level.
Once the level of orders is insufficient to affect the support or resistance level that level will eventually break. Investors were testing this level
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for almost two weeks before it finally closed over the 10,000 mark. In essence, the traders have generated what is called a "support level" at the $40 mark because multiple buy orders have accumulated at that price. The reasoning behind this round number phenomenon in commodity, stock and forex trading is that part of humans that is attracted to round numbers. The First Bounce Is The Best Round number support and resistance is extremely attractive to those utilizing a Day Trading strategy.
Day
Trading
