Psychological Price Levels

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Today we will talk about the psychology of the crowd, the price levels that attract the bulk of traders, and what we do with all this - at what levels to pay attention to and how to properly place orders for entering/exiting the market. And, I will share with you a useful indicator for automatically determining the key price boundaries.

Round levels on Forex

Remember: when you last went to the store and saw the price for something, say $395, did you think to yourself “$ 395 - how expensive/cheap…”? I’m sure not. You thought of “400 dollars,” not 395.

We always ROUND the prices. 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 1.3300, 1.5000, 1.2600, etc. there is a real fight between bulls and bears. And, it is unknown who will win.

However, round price levels represent a certain obstacle, so we can say that price values that are multiples of one hundred (00) serve as support/resistance levels for the price.

Price levels of increased activity

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.

But, there are other levels that intraday-traders should not forget about.

20, 50, 80 are levels of increased activity with an intra-day trade. Examples: 1.2050; 1.3280; 0.9020.

Why is there a lot of forex orders on levels 20, 50, 80? The point is, again, in psychology. 50 is half the distance from one round level to another. 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, 1.3120, i.е. hang somewhere in the area of 1.3115, it seems that the price almost did not go from 1.3100. But, when the barrier 1.3120 is reached, the way for the price above is opened. Naturally, we are now talking about the psychological point of view.

The situation is similar to the level of 80. As soon as the price reaches 1.3180, a something is triggered in our brain “now is close to 1.3200 “. And, the same for the other traders.

How to place orders taking into account the price levels of increased activity?

About levels of increased price activity and the accumulation of orders is known not only to us but to market makers. Therefore, it often happens that the price does not reach just a couple of points to a round level and unfolds. Even entries on levels with multiple orders of other traders lead to requotes, i.e. loss of potential profit.

Therefore, it is worth entering the market 5 points higher or lower (depending on the situation and position), of one level or another, but not at the levels themselves.

Thus. if you have opened a buy position with a target of 1.3100, then it’s better to move the take-profit to 1.3095.

Indicator of price levels Key Levels

The Key Levels indicator can alleviate the task of accounting for key price levels. Its installation is carried out according to standard instructions.

Everything that it does - displays the price levels of 00, 50, 20 and 80 in multi-colored lines. It looks like this:

Indicator settings

Show 00_50 Levels - on/off display of 00 and 50 levels
Show 20_80 Levels - on/off display of 20 and 80 levels
Level 00 Color, Level 50 Color, Level 20 Color, Level 80 Color - level colors