Other important numbers which are not derived from fib tools are psychological whole numbers.
If you look at any chart you will see how price tends to few these levels as important support and resistance levels. Humans have the tendency to simplify things. If somebody asks me for the price of a laptop I had recently bought which has cost me 538. - Dollars, I would most likely answer 500.-. Out of simplicity most people would do the same. These things happen in trading to. Some traders just use these levels in their trading strategy. Let’s have a look at a EUR/USD 1 hour chart
So what are whole numbers? Whole numbers are double zero’s, or even 100 pips steps, like in our example above 1.2600 and 1.2500 or like in the example below (AUD/USD 1 hour chart) 0.900, 1.000, 1.100…..
You can even go further and include the fifties in this picture as well
You can see that many of the price swings occurred at these levels. They are not working all the time, but I found them important enough as many traders watch them and react to them, they give us important support and resistance levels. It is nice to keep this in mind if you want to enter a long (or short) trade just below (above) a whole number, or a fifty because it can greatly mess up your trade set up.
For a degree of importance I found that the 1.300, 1.400 numbers are of higher importance (they tend to be stronger support and resistance) then let’s say 1.3100 or 1.3200…. and these numbers in turn tend to be more important than the 1.3150, 1.4150.
These are not “golden ratios” or important numbers in itself, but they tend to work because of human nature and the way we simplify things. And as we are all doing this it becomes a self- fulfilling prophecy(like fib. numbers), which we can use in our trading arsenal.
hope you liked it, have a nice day
Excellently explained. Thanks for doing it Joachim!