I consider whatever levels that has proven to be historically significant as sup/res.
But, no doubt that 00-levels are important thresholds for leading indicies such as Dow/S&P500. The proof for this can be found by looking at e.g. ES MP or daily charts a few weeks back. Remember that the market place is mainly consisting of human involvement, which is subject to the same tendency as everyone else to lay some extra importance on round numbers. Thus, you will often see fights taking place at these levels.
I would place less importance to round numbers in EU markets such as DAX, CAC40, FTSE, as I see them mainly as followers of the US indicies nowadays, rather than anything else.
The following user says Thank You to jerry828 for this post:
I trade CL, and for sure .00 and .50 are very, very important levels. The first time price trades at that level that day you will see a very clear reaction to it. First, price tends to gravitate towards the level, and second there are usually a lot of stops at the levels so you will see it test, bounce, and re-test in a strong trend.
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The following 2 users say Thank You to Big Mike for this post:
I think some instruments are more sensitive to round numbers than others. The Forex market is particularly sensitive to them. The S&P 500 is less sensitive so much that i don't consider them except for big fat round numbers such as 1000 or 1100. I know a commercial vendor that uses round numbers as a core component of his framework. His system does not use any other indicator than round numbers: The Trading Institute Reviews and Ratings | Steve Rising | Thetradinginstitute.com reviews
I started trading the Forex with his philosophy so i can assure you that round numbers can make you win money if you know how to tackle them.
The following user says Thank You to trendisyourfriend for this post:
Monroe Trout discussed the round no. effect(magnet effect) in New Market Wizards.
Based on my forward-testing experience, I do think that it works to certain extent especially in chaotic downtrend environment because there are many participants who got caught on the wrong side are rushing to the door to get out in turn exacerbate the downtrends making it faster to reach the round no.
conversely, if you see key levels being correct supported quicky and hold, you should go long quickly to capitalize on the situation.
The following user says Thank You to ptcm for this post: