Psychological Price Levels

Greetings to all visitors of our forex portal! Today we will talk about crowd psychology, about the price levels that attract the bulk of traders, and about what we should do with all this: which levels to pay attention to and how to correctly place orders near them for market entry / exit. I will also share with you a useful indicator for automatically identifying key price boundaries.

Remember: when was the last time you went to a store and saw the price of some item, say 395 rubles, did you really think to yourself "395 rubles - how expensive / cheap..." ? I am sure you did not. To yourself you thought "400 rubles", not 395.

We always ROUND prices. This is a normal human tendency to simplify everything. Traders have it too. Therefore, levels divisible by one hundred (with two zeros at the end) are so attractive to the crowd. It is precisely at levels like 1.3300, 1.5000, 1.2600 and so on that the real battle between bulls and bears takes place. And who will win is unknown.

In intraday trading, increased activity is observed at certain price values. We have already talked about 00 levels, and the fact that they attract attention is clear.

But there are also other levels that intraday trading enthusiasts should not forget about.

Why is there a large concentration of forex orders at levels 20, 50, and 80? Again, it is psychology. 50 is half the distance traveled from one round level to another. Agree, when half the job is done, working becomes much easier, right? The same is true with price.

As for levels 20 and 80, the situation is similar. Until quotes reach, for example, 1.3120, i.e. while they are hanging around somewhere near 1.3115, it seems that the price has hardly moved away from 1.3100. There is no need to take action. But when the 1.3120 barrier is reached, the way higher for price becomes open. Naturally, we are now talking from a psychological point of view.

A similar situation occurs with level 80. As soon as the price reaches 1.3180, a trigger goes off in our brain: "now 1.3200 is just around the corner". And the same thing happens with other traders.

Not only we know about levels of increased price activity and concentrations of orders, but market makers know as well. Therefore it often happens that the price falls just a couple of points short of a round level and reverses. Even entries at levels with many other traders' orders lead to requotes, i.e. losses of potential profit.

I.e. if you have buy positions open with a target of 1.3100, it is better to move the take-profit to 1.3095 .

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

All it does is display price levels 00, 50, 20, and 80 as lines of different colors. It looks something like this: