Trader Techniques That Will Instantly Improve Your Edge in Markets
Round Number Theory
What is the Round Number Theory trade method? Well, you may or may not have heard it before. It is an excellent psychological technique that works when the price of any given asset pivots around round numbers.
Everyone likes round numbers, so large volume tends to pivot around flat numbers. $100, $1000, $50, 1.00, etc.. In this example, we use the oil market and illustrate a couple of essential concepts that should help you whether you are new to the market, a veteran trader, or just a participant looking to improve an edge.
I like to keep this simple; however, in this particular scenario, since we as a firm have reported on Oil so consistently over the years, I will go over the whole process starting on March 1st, when Oil first made a new local high in 2022. As you can see in the chart below, Oil rapidly skyrocketed in price to $116-$125, depending on where you trade, in just one day. It was a very violent speculative impulse move. As some of you know, beware of violent market trajectories as they tend to reverse pretty quickly. This brings us to our first trader technique, the Round Number Theory.
After the initial impulse, demand slowly and organically started to climb. As you can see from the chart, the market hovered around $100, used as the basis point for our trade.
You can utilize this technique in stocks, cryptos, commodities, and more situations. I am sure with time, if you journal and track the data as I have done, you will start to see its effectiveness.
The conditions for a trailing elevator stop work on primarily higher timeframes. Daily, 3D, and Weekly candle close. You want to wait for the candle to close before trailing a stop-loss. It can be a mental stop loss or placed in the books, depending on your position/volume size.
You have to be patient and screen assets properly. You are looking for trends and the purpose of capturing a more significant portion of the move.
It may not always work 100%. However, it will solve the pesky problem of closing winners like Oil too early and before the returns.
I hope you enjoyed the read. Feel free to check out our newly released trading suite and use coupon code EMP22. Have a great day, and thanks for reading.