How long can psychology level be used?
There are terms that every trader needs to understand because they also support the course of trading. The terms in question are psychological levels, SNR, and retracements. The psychological level is where the prices stop there, many stop and then come back. In essence, this psychological level is where the highest or lowest price then reverses.
Psychological levels are market price levels or levels which are often key levels in forex which are denoted by round numbers. These round numbers often act as support and resistance levels.
Psychological support and resistance work consistently because of fundamental human nature. Humans value simplicity from a trading perspective, which means valuing integers. Traders often use these numbers as entry, exit or stop levels. These stops and limits can change the order flow and price changes.
Identifying Psychology Levels on Forex Charts
Traders will often call this integer interval 'double zero' because this price is at even numbers like 1.31000 for EUR/USD, 1.57000 for GBP/USD or 132.00 for GBP/JPY.
Some traders will take the rarity even further by looking at the number directly in the middle of an integer or 'fifties'. These levels, such as 1.31500 on EUR/USD or 131.50 on EUR/USD or 131.50 on GBP/JPY can often play out in the same way as double zeros.
Traders will notice that there will often be some element of congestion at this key level in forex as prices move up or down. As a result these prices act as psychological lines or levels that work well as support and resistance. Not all of these prices serve as support or resistance, but enough of these levels warrant a trader's attention.
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