One thing you can find annoying when trading BTC is having to nitpick numbers that are too specific within the charts.
That is, having to take too many decimals into consideration (even especially in case of other altcoins).
In fact, this is true for most traders, as most investors and trading institutions set their key orders at round numbers, so knowing this and plotting ahead of them can be very profitable.
Today, you’re going to learn about the importance of round numbers and how to trade them.
Round Numbers And Their Importance
Round numbers are simply those price levels without any decimals, like 4500.00 or 4756.00. They are the easiest way to set up your orders by far. The more "round" the number, the more important - for example the most important price levels in the case of Bitcoin are 4000, 5000, 6000 etc.
Why is it important to take a look at them? Well, the importance is not so much about how to use them but how to play around them.
You see, round numbers are much easier to use when planning stop-losses and take-profit orders, as well as buy/sell stops or limits. The result is that they’re the preferred reference points for a lot of traders from around the world.
Look at this 5 minute BTC graph:
There were 7 different instances where candles closed at a round number and then nicely reversed.
But, what about the candlestick highs and lows?
12 opportunities! Round numbers acted as tops or bottoms once again. Can you see what this means?
Why is this important?
Well, trading is all about staying ahead of the market, so knowing when traders tend to enter and exit trades - and which specific points are pivotal - can give you a big advantage over many others.
As you can see, round numbers simply act like important support and resistance price levels.
How To Use Round Numbers In Your Trading
The first thing that may spring to your mind is placing your S/L or T/P at these points:
This is an example of how to simplify your trades using round numbers:
Another great way to use round numbers is limit entries to confirm trends. In these trades, the trader should use the SELL limit order for example at 4400 to give time for the candle to confirm the price momentum. And, also, this can help to prevent false breakouts.
As you can see, round numbers can be used very effectively like important support and resistance price levels. - And, they simply are! Especially when there is a confluence - like a round number, classical support/resistance zone based on market swings, and a price action pattern - this is your high probability trade!