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Psychological Price Levels
Just a quick question here, on what exactly do we mean by psychological price levels.
Now a psychological price level, quite simply, is just round numbers, in terms of the actual rates on your chart, so this is just the Euro/US dollar. And you can see that I’ve mapped out a couple of psychological levels here, the 1.11. The 1.10. The 1.09. The 1.08 and the 1.07, and then in between, we also have the 1.1150. 1.1050, 1.0950, 1.0850, 1.0750, just as a couple of examples.
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Now, the reason why we include these in our analysis, is because they are popular in terms of targets as well as stop losses for traders, out there in the market, we can see lots of these main swings and reactions that we’re seeing, just on this Euro/US dollar alone, happened at psychological levels, here we can see that resistance coming in right below that 1.1150.
Here we can see support coming in at the 1.0950. As well as a support again at the 1.0950 year resistance, again, resistance, resistance, resistance, another resistance, some support years while seen on the 1.0850, and more recently a 1.0850 as well, so, you can do this exercise on a couple of charts. And you can see the type of reactions that we can get from these levels.
So that is why we use them in our analysis and this what we mean when we refer to psychological price levels, on the charts.