Why there are psychological levels on numbers like 1.3?

If banks and corporations are the ones who affect price, why the psychological levels exist? I would understand that inexperienced retail trader might do thing like this:

if the trend is going down and hits psychological support at 1.3, trader buys expecting that this is support and trend will turn around.

But if banks and corporations know that this is not support level, they do not start to buy, but continue selling, then this psychological level does not matter. I assume banks and corporations do not care about round numbers, because they have specialists. They care aboutt economic data and how much currency is really worth.

The market is always looking for liquidity (a cluster of orders), that is the only way for smart money to enter or exit the market. Lots of people are lazy and they put their orders at round numbers, because it is fast and easy to type in. So there always will be some kind of clustering at round numbers.

Smart money sees this, and takes advantage of this by adding or taking off some of their positions, thus there will be some kind of chop around this level. And this makes people think it must be a turning point. But, as you said in your example, if smart money is still expecting lower prices (because supply is still control and the market is weak), they will absorb the orders and the market continues lower. You are right, they'll on start buying when the instrument is worth buying, which can be at 1.28546 or whatever.

Why uninformed traders operate on rules like round numbers? Because they try to find some easy rules around trading. Like the one about "a weekend gap ALWAYS gets filled very quickly". This forum was all about it, when the gap appeared on EU late April. The gap is still open 2 months, and the market moved up 400+ pips.

"They care aboutt economic data"

Nah....all the data and news are already discounted in the market....what smart money really cares about is the overall balance of supply and demand.

hmm, at some point they are not counted yet I guess. For example - there was first round of france presidetnt election. Why the eur price moved after election? Becuase it was not counted that Macron will win.

So there could be a chance to buy eurusd on firday, have a big TP and small SL in case macron does not win. But the problem for me is - I do not know what the eur is really worth if Macron is winning.

Probably same with sell if macron is not winning - would have been sudden move down.

After some time, maybe minute after news are known, yea, it is already counted in the market.


how do I know supply and demand before price moves?

Too many people ask "why" in trading (start asking how price will move next). . When you ask why, you end up looking for a reason for every 5 pip tick. Ask "how" is price gonna move next.. Is it gonna SPIKE? is it gonna grind? is it gonna retest? When you think you know how it will move place a trade.
For example if I see Major support.. I"m gonna as myself how will price move if it start to break. Will everybody start dumping and give it a huge spike? When I'm fairly confident, I place a trade. The reason why it broke is of little use to me, but how its moving after the break is where i'm making the money.
The important question is what will happen if 1.30 breaks.. What would I expect. How will the candles look?

excellent post.

that is interesting also. I see often prices goes lower than support level but it often jumps back. So then also I need to know, when I can count it had broken the level, but at the same time - not being too late. If I am too late, I had missed money.

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Too many people ask "why" in trading

but next move depending on this answer? For example. How price will move after it went up after macron has won? Because we know that price went up because Macron won, we can assume that price will not go down if it not went up too much.

So if we ask why prive moved up and the answer would be - Macron won and eur was overvalued, then next move we can assume will be down because it is overvalued.

But if answer is just Macron won, then next move will need some new trigger. If nothing changes fundamentaly, then price also should not change. Or if not increased demand. But demand increase because of some fundamental data probably.

https://www.dailyfx.com/forex/educat..._in_Forex.html

Like I said, theoretical guru trading.