It is a well known behavioural fact that humans have a round number bias. We just like round numbers. During a visit to the gym recently keeping the RPM’s over 100 was a keen aim. If the RPM’s dropped under 100 something psychologically kicked in to give an extra push in order to hit the ‘big round number’.

Chart

This phenomena turns up all over the place. Look at the London Marathon finishing times and how they cluster around the big round numbers of 3 hours, 3:30 hours, and 4 hours.

Chart

Most of us are very familiar with pricing that keeps under a big round number. Most goods for about £3 will be priced as £2.99. Staying clear fo the ‘£3’ label, even by a penny, means more sales will be encouraged.
Humans love big round numbers as key reference points. You will have noticed this yourself when you say ‘I will close my position when my equity hits £10,000’ or ‘I will sell the stock when it reaches $100’. This means that traders need to be aware of this impact when trading.

The big round number effect

Whenever you are trading, this has a number of implications for placing orders.

For limit orders: Place buy or sell limit orders at, or near, big round numbers.
For a take profit : Place your TP just a few points BELOW a big round number
For a stop loss: Place your SL just a few points BELOW a big round number.

Also, keep a careful eye out for how big round numbers act as key support and resistance numbers. You will see how influential they are.


Learn more about HYCM

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

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Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

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GBP/USD struggles to hold above 1.2300

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USD/JPY: Loss of upside momentum looks imminent

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Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD has lost its bullish momentum after having climbed above 1.0570 with the initial reaction to the US data in the American session and retreated toward the mid-1.0500s. On a weekly basis, the pair remains on track to close in positive territory. 

EUR/USD News

GBP/USD struggles to hold above 1.2300

GBP/USD struggles to hold above 1.2300

GBP/USD has edged lower following a jump above 1.2300 in the early American session on Friday. The market mood remains upbeat ahead of the weekend with Wall Street's main indexes posting strong daily gains on upbeat US data. 

GBP/USD News

Gold stays below $1,830 as US yields edge higher

Gold stays below $1,830 as US yields edge higher

Gold continues to fluctuate below $1,830 on Friday and looks to close the second straight week in negative territory. Fueled by the risk-positive market environment, the benchmark 10-year US Treasury bond yield is up more than 1% on the day, limiting XAU/USD's upside.

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Why Cardano could surprise over the weekend

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ADA  set to close out the week with a gain on the workday trading week and over the weekend? Central banks signaled that the rate hike cycle is ending, meaning less stress and tight conditions for trading, opening up room for some upside potential with Cardano set to pop above $0.55 and test a significant cap.

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