In the world of electronic forex trading where an increasing volume is generated by automated programs, it amazes me that psychological levels still have a significant impact.
It may be that my mind acts as an algo but whatever the case there are pivotal forex trading levels I have used for decades that are as relevant today as they were when I first started trading. One of these is the “50” that I describe in this article.
While what I refer to as big figures or magic levels (others call them round numbers such as 1.08, 1.10, etc) often set the tone and direction for a currency, I find the “50” level may be the most important one for intra-day trading. What I mean by”50” are levels like 1.0850, 1.2650, 151.50, etc.
It may be as simple as the “50” level is often an options barrier or a place where buy/sell/stop loss orders are placed although I believe the psychological influence may be most important. As an example, test your sentiment towards a currency when it trades above or below the ‘50” level. It affects my emotional sentiment towards a currency and assume it may affect yours as well.
I have created the following video to illustrate the point.
As you can see by the video illustration, the “50” level initially provided support in GBPUSD but the bias changed after retreating back below it.
See what happened LATER after the 1.2650 level capped the upside.
As I noted, sometimes the “50” level acts as a support or resistance, sometimes it is like a magnet and other times it acts like a battle line. No matter what the case, it has an influence on sentiment and helps set the bias for a currency. As with any indicator, you need to put it in perspective with the overall trend in the market.
As always feel free to contact me at [email protected] with any questions, or comments or to ask me more about how to use the “50” level for trading.
Jay Meisler, co-founder, global-view.com
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