Method One: The Round Number Theory

Deciphering the Round Number Theory in Trading

What is the Round Number Theory, and how does it influence trading strategies? This method hinges on the psychological inclination towards round numbers, a phenomenon familiar to many. It's observed that asset prices frequently pivot around these round figures—$100, $1000, $50, 1.00, etc., drawing significant trading volumes due to their psychological appeal. In this exploration, we delve into the oil market to illustrate the Round Number Theory's principles, offering insights beneficial to both novices and seasoned traders alike.

Adopting a detailed approach, let's rewind to March 1st, 2022, when oil prices hit a new local peak. Within a single day, prices surged to $116-$125, showcasing a rapid increase driven by speculative trading. Such swift market movements, however, are often short-lived, reversing with equal speed—a key point of caution for traders. This backdrop sets the stage for our first technique: leveraging the Round Number Theory.

Application and Efficacy

As market dynamics unfolded, we observed a gradual increase in demand, with the oil price stabilizing around the $100 mark. This level served as a pivotal point for our trading strategy. The Round Number Theory is not limited to the oil market; it finds utility across stocks, cryptocurrencies, and commodities, proving its versatility. Through diligent journaling and data analysis, you too can attest to its effectiveness over time.

Trader Technique: Elevating Risk Management

  • Elevator Stoploss Strategy: This technique shines in higher timeframe analyses—daily, 3-day, and weekly candlestick closures. The essence lies in patience, awaiting the candle's close before making any stop-loss adjustments. This can be a mental note or a formal placement, tailored to your trading volume and stance. The primary aim is to discern trends and secure a larger segment of the price movement, despite the inherent challenge of not always capturing the full potential of winning positions. The case of oil trading exemplifies the premature closure of profitable trades, a common pitfall this strategy helps avoid.
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We invite you to explore the newly launched trading suite, extending a special offer through the coupon code EMP22. It's our hope that this exploration into the Round Number Theory enriches your trading toolkit, equipping you with strategies that refine your edge in the market.

Wishing you a prosperous trading journey,

Best regards,

Emporos