Round numbers

 

Watch out for round numbers

 

Humans love round numbers and these markets are a product of human nature. You will often find that traders love to exit their trades at round numbers such as 1.50, 1.75, 2, 2.20. You can use this to your advantage when trying to gauge just how far a steam or drift will go. You might see a team steam from 1.75 down to 1.50 but not go any further then the 1.50 simply because a lot of traders are either backing/laying at that particular price point. In the trading world this creates what is known as a resistance or support points within the market. So once your trade appears to have hit one of these points you might consider exiting the trade as that might be as far as the trade will go before rebounding back. On the flip side, once a price breaks through a resistance/support point you can be in an excellent position as it will normally move all the way down to the next round number. For example, if the price is steaming and breaks through 2.0 then the next price it will settle at will be either 1.95 or 1.90.

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