Psychological levels of Forex.

Trading on the currency exchange is very closely related to psychology; it is psychological factors that often cause surges in demand or supply, which cannot but affect the movement of exchange rates.

The Forex price usually moves in a certain price corridor, often the boundaries of such a corridor are the so-called psychological levels. Where are such levels located and what is their formation based on?

Psychological Forex levels appear in the area of ​​round price values, since most traders believe that the price, having overcome a certain value, will most likely move further than turn in the opposite direction. Examples of such levels are marks - 1.2000; 1.3500, 2.7550.

The more zeros in the quote, the stronger the psychological level of Forex, but not everything is so simple in this matter, therefore, during the trading process, false positives of pending orders , or beginners simply suffer losses wondering why a breakdown did not occur.

Point of entry.

When trading using psychological levels, the price of the entry point is located a little further than the level itself, usually a distance of several tens of points.

That is, most orders are set at around 1.2700, and at 1.2720, as a result the following situation develops: the price reaches 1.2700, but since at this moment there is no increase in volumes and no increase in demand or supply, it reverses safely in the opposite direction.

If the rate has overcome the mark of 1.2720, a massive opening of transactions occurs, which only spurs the trend towards a breakdown.

Confirmation.

When trading at psychological levels, it is a good idea to pay attention to the current support and resistance lines ; they serve as an additional argument confirming the breakdown or, conversely, increasing doubts about its authenticity.

Profit goals.

If you opened a deal at 1.2720, then the most successful places to set take profit will be 1.2745 and 1.2795, why exactly these values, and not the same round numbers?

Because, in addition to the fact that the price can break through psychological levels, it also readily makes a reversal when approaching them, so why risk it for a couple of points.

By the way, the moment of reversal is also successfully used by many traders in their trading, but in this case, Forex orders are opened after the price rebounds and begins to move in the opposite direction.