I Trading ETFs with round numbers

摘要

Index-based, currency-based and commodity-based exchange-traded funds frequently find support or resistance at half-dollar and whole-dollar levels, often independently of other technical conditions. This phenomenon can help you profitably trade ETFs as well as associated futures and options. Trading tools do not have to be complicated. Indeed, anecdotal evidence suggests that if you can count by whole- and half-dollar increments, you have a solid basis for tracking intraday movements in several markets. These levels often identify market price turning points in certain exchange-traded funds (ETFs). Using this knowledge is one more way to anticipate support and resistance and improve your trading. One reason for this phenomenon could be that small and large traders alike find that placing orders at a 50c or $1 level is easier on the brain. Perhaps it's a form of groupthink, wherein what's convenient manifests itself as a dynamic of the markets as a whole. Of course, the groupthink argument might logically follow from the adage that stop orders are predominately placed at round numbers. That this tendency is stronger for retail-oriented investment vehicles, such as ETFs, makes sense.