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How to Trade EURGBP With Psychological Levels [In-Depth Guide]Welcome to my 200th idea special analysis! In this idea I will explain in-depth how you can leverage psychological support and resistance levels for trading EUR/GBP. This will help you earn more money while trading, and gives you more understanding about the markets. I have been talking about this for quite a while now, and every time it shows that it works again and again. I will split this idea in multiple aspects. First of all, I will go into EUR/GBP and explain the most important levels on the chart based on the principles of human psychology. Then, I will explain what I believe are explanations for the fact that these levels are so important. Last, I will explain how you can benefit from these concepts. -- What are these psychological levels you are talking about? -- Look at how BEAUTIFUL all the numbers are on my chart. They are all incredibly round numbers, which match perfectly to the levels of support and resistance . The levels that I identified are: 0.9500 (resistance level 2) - Psychological Level! 0.9000 (resistance level 1) - Psychological Level! 0.8750 (support level 1) - Psychological Level! 0.8279 (support level 2) - Regular level Computer scripts don't come up with these round numbers, humans do. You can see human trading behavior at work here, along with human psychology. This is exactly where humans would put their limit orders, or where they will put price alarms. Let's compare the different kind of support and resistance lines you can draw. First, there are the most regular ones based on past price behavior. A local high will be extend on the chart to indicate that this has been a point where price has historically bounced. This has medium predictive power. Secondly, there are psychological levels without any price action. Simply looking at a chart and seeing EURGBP is about to hit 0.90000 exactly should make you conscious about having psychological resistance. You can add these lines to your chart. Thirdly, there is confluence between psychological and price based support or resistance. Those are the ones I charted here for you. These have incredible predictive power. Keep an eye on them. They are important. A great way to confirm these level is by zooming out and going back in time. I tried to show it on the chart here, but it would simply get too cluttered if I show you multiple timeframes. If you take these levels, and you zoom out, you see that the same levels are important over and over again. These levels can perfectly predict highs and lows throughout months, even years. This is why you should always add these on your chart! -- Why do markets have a strong tendency to have these human levels -- A high percentage of all trades are algorithmic, made by computers who couldn't care less about the actual underlying price. They are designed to get profit, and that's it. However, it's not only algorithms at work. A recent study showed that about 20% of all trades is still made by human investors. People are led by their emotions. That's what makes trading hard for beginners, and trading profitable for experts. These are the four main reasons the psychological levels work: 1) When the price surpasses such a psychological level, news articles will be published. Can you see it happening already? "EUR GBP Surged Above Levels of 0.900 in Strong Trading Day." This creates a massive awareness on the asset and leads to an increase in trades and thus volatility . 2) People put their price alerts on these levels. Like quickly mentioned above, people use tools to alert them on price changes. Where do you think they put their alerts? Exactly, on these beautifully round number. 3) People put their stops and take profits on these levels. "Hmm, when should I leave this trade? Surely if the prices go above 0.9500 I would want to be out." Again, this reinforces the importance of these levels. 4) Finally, it creates a self-fulfilling prophecy. Why does trading based on support and resistance works? Simply put, because everyone else thinks it works. If everyone draws the same lines on their charts, they start to add value simply because of the masses using these supports and resistances. -- So, How Do I Beat Other Human Traders? -- First of all, think carefully about where you put your limit orders. If the resistance is at 0.9000, don't put your limit order at 0.9010 right above a huge resistance. Be smart, and put it at 0.8990 or even a little bit lower. This reduces your profits only slightly, while greatly increasing the odds that your limit price will be hit. This also works for buy orders, never put those on round price levels. Instead, look for non-round numbers slightly disadvantageous to the profit, but very positive for the chances to get filled. Then, there is predictive power in these levels. This is all based on regular support and resistance technical analysis knowledge. You can expect uptrends to be broken around horizontal resistance, or downtrends to be broken around horizontal support. There is always increased friction around these levels, and your best bet comes from trading within these levels, never across these levels. Near such a level, exit the trade, wait for confirmation of the direction of the price and decide with which position to enter again. -- And how do I trade EUR/GBP knowing all this? -- We see that the price just got rejected at the psychological 0.9000. We have confirmation of a price reversal at that point, so a logical way to monetize this technical analysis is by entering a short position. A logical place to exit such trade is near 0.87500 I have made all this knowledge available to you completely for free on Tradingview. Please support my work by giving this idea a thumbs up! - Trading Guru -------------------------------------------------------------- Disclaimer! This post does not provide financial advice. It is for educational purposes only!
Short
by Trading-Guru
19
GBP/USD Continuation of Fantastic Trade on CableIn this idea I will explain how you can enter GBP/USD (Cable) with a great risk-reward trade based on the technicals of horizontal support and resistance. Whoa. We had such an amazing trade here on GBP/USD last time using these zones, let's try to do that again. First let's quickly recap our previous succesful idea: We found confirmation on the resistance, and had a beautiful short trade. Currently, we are seeing the price lowering towards the support area. You could wait for some sign of support, or enter the trade now. Since the support area is relatively small, you can enter this trade with a great risk-reward. The second important thing to note is the interesting periodicity. Every 8 days, large moves seem to happen. Basically all important pivot points are around the 8 days period and the price is approaching another 8 day mark soon. Follow me for consistent high quality updates, with clear explanations and charts. Please like this post to support me. - Trading Guru -------------------------------------------------------------- Disclaimer! This post does not provide financial advice. It is for educational purposes only!
Long
by Trading-Guru
11
GBPUSD: Sell opportunity after a Double 1D MA200 rejection.GBPUSD is trading within a +2 year Bearish Megaphone and since April 15th has had a double rejection on the 1D MA200 (RSI = 47.993, MACD = 0.001, ADX = 26.766). Even though the 1D technical action is neutral, this is not an encouraging development and since the 1D RSI can't get past the 5 month Resistance Zone, we are taking this as a bearish signal. Our medium term TP is the 1.2000 Symmetrical Support. Previous Signal: ** If you like our free content follow our profile (www.tradingview.com) to get more daily ideas. ** Comments and likes are greatly appreciated.
Short
by InvestingScope
2
Double Top Fractal on GBP/USDThe double top is a bearish pattern. What is interesting to see is that GBPUSD is making a perfect fractal here on the second top so far compared to the first top. Even the two larger volatility candles where the rush to the top and the strong rejection takes place get copied exactly. They have a 16 days distance in-between them. The most logical scenario is now to monetize the continuation of the fractal and hold a short position when GBP/USD starts the new tradingweek. There is a slight bullish offset from the first pattern to the second, so you could consider setting the take profit slightly higher and therefore more conservative. Follow me for consistent high quality updates, with clear explanations and charts. Please like this post to support me. - Trading Guru -------------------------------------------------------------- Disclaimer! This post does not provide financial advice. It is for educational purposes only!
Short
by Trading-Guru
7