Round Numbers

Round numbers are the plainest psychological levels. Traders place limits and stops at 100, 250, 1,000, and similar prints because the numbers are salient. In an index, 20,000 matters in the newspaper. In a stock, 1,000 or 500 can matter. The ending zeros are the definition.

Look at the price scale. Levels at clean increments, often also at halves such as 50 and 25 in a lower-priced name. The increment that matters scales with the price. A round number for a 20-rupee stock is not the same step as for a 2,000-rupee stock.

Round numbers are places to expect a pause, to take a partial, or to give a stop extra room so it is not sitting on the number with everyone else. A break and hold beyond a major round number is a sentiment event as well as a price event.

Putting the stop exactly at the round number. That is where the sweep aims. Also believing a stock must bounce at 100 because 100 is round, while the trend is a waterfall.

Not every zero is important. A price that has lived between 1,000 and 1,100 will care about those bounds more than about 1,050 if 1,050 was never a swing. Combine the round number with an actual swing when you can.