Trading around the Psychological round numbers like 7000, 8000, 9000 are never been a easier task mentally. This is where many trading participants come up with weird forecasting stuff and this is the zone where frequent stop hunting happens and it is the process of removing weaker hands before market does its next move.
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Weird Forecasting Around Round Numbers
For many people those who watches just the price or price based indicators try to defend round numbers as psychological support/resistance zone. This is where most of the players go wrong when markets constantly whipsawing around the psychological reference.
Totally it is a frustration game to trade around psychological reference zone. For Example any price dip below 8000 will invite dumb forecasting levels like 7500, 7200, 6800 kind of prediction and recovery above 8000 will again build assumptions like “Nifty Bottomed out” kind of stories and make players to place stops around 8000 – round number levels.
Frustration Game Around Round Numbers
A constant whipsaw around the psychological reference zone kills the patience of the players as the short term dips are sharp and the recoveries are even sharper. However this ongoing whipsaws for some time make players to loose faith in their market prediction levels. After a long frustration when the real rally occurs that brings even more discomforts among the participants, disbelief about the rally and that makes them to come and trade exactly against the trend.
Whenever market nears the psychological reference and if there is a constant whipsaw around the reference then one should recognize the game much better than the others thereby better focus on your charts, re-strategize and eliminating un-necessary mental strain.