Psychological levels and Fibonacci numbers

Psychological levels and Fibonacci numbers

17 March 2019, 14:58
Yurij Batura

You, probably, noticed that you want to place stop orders somewhere in the region of round price values of 1.00000, 1.10000, 1.20000 or 1.25000, 1.25500, implying that the price, having overcome a certain value, is likely to go further than it turns in the opposite direction. The more zeros in the quote, the stronger the psychological level of forex. But often such a strategy entails a loss or a shortfall in profits.

Then the question arises: where to place a stop order (stop loss or take profit)?

In my trading experience, I noticed an interesting tendency that the market is slightly frozen around 20-30-50-70% between numerical values of 1-100 or 1-1000., For example (on the USDCAD pair),

Psychological levels and Fibonacci numbers

during the growing movement, having overcome the psychological level of 1.34000, the price may stop in the area of the numbers 1.34236 or 1.34382, or 134500 or 1.34618 or 1.1764 (as we see, this happened at 1.34618). It depends on the strength of the trend and market volatility. All these actions are relevant for the reverse price action when it falls, only now it will be the numbers 1.33764 or 1.33618 or 1.33500 or 1.33382 or 1.33236. However, the listed price values in the example are none other than the sum of the psychological level and the Fibonacci number (1.34000 + 236 = 1.4236, ... 1.34000 + 618 = 1.34618).

From all of the above, the conclusion follows: in the forex market, on intraday trading, stops should be installed according to the rule described above, without forgetting about the spread (we take it away from the stops), then your losses will be minimal and profits will be maximal.

Good luck on the forex market!

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