Round numbers strategy in Forex Trading – This is another very simple, but extremely efficient strategy. The round numbers (example EUR/USD 1.3600, USD/JPY 98.00) are natural levels of support and resistance. A lot of orders are placed around these levels.
In the following article, we take a look at round numbers in the context of stop loss and take profit placement, round numbers as support and resistance and what we can learn about the round number effect by looking at brokerage data.
You should study carefully the price action around the round numbers and improve the strategy.
- The prices approach round-number support.
- A long position is initiated when:
- the price hits the round number, or
- the price breaks a few pips below the round number.
- RSI line above level 55
- Bullish Price Action signal
After the position is open an initial stop-loss order is placed 2-3 pips below the low reached during the test of the round number or a fixed distance from the entry point.
- The prices approach round-number resistance.
- A short position is initiated when:
- the price hits the round number, or
- the price breaks a few pips above the round number.
- RSI line below level 45
- Bearish Price Action signal
After the position is open an initial stop-loss order is placed 2-3 pips above the highs reached during the test of the round number or a fixed distance from the entry point.
Stop-loss orders for traders who are in a long position are clustered below a round number. Stop-loss orders of short trades are mainly clustered above a round number.
Take profit orders of buy trades are usually clustered below a round number, whereas taking profit orders of short trades are clustered above a round number.
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