Topic: Round numbers tests
Round numbers (1.5500 for EUR/USD or 107.00 for USD/JPY) are natural support and resistance levels. many traders are placing their buy or sell orders above or below round numbers. These orders can stop or accelerate a move and are tempting tartet for the large speculators. A simple and efficient strategy could be based on the testing of the round numbers. The rules are simple. We buy if the round number is below the market and sell if it is above the market. A few additional conditions could be used:
- Trade the first or the second test of the round number. The third test usually is a break of the level.
- The test should be preceded by a larger move - 15-20+ pips.
- Especially for buy it is better to wait for small break of the level. If the level is 1.5500 for EUR/USD we can buy @ 1.5495 for example.
- For better results we can trade this strategy only if the daily range is wider than normal. For exampel today's raneg for EUR/USD was 155 pips before the test of the 1.5500 level.
This is example form today. The first test of 1.5500 provided an ebtry between 1.5500 and 1.5496, with stop and limit of 10 pips. The second test is more interesting. It could be traded by direct entry between 1.5490 and 1.5500 with 10 pips stop and limit or buy buying above the congestion @ 1.5502/03 with stop @ 1.5487 and limit 1.5520/25.