I tested psychological trading levels 100 times to see if they actually work.

What does that even mean?

Well, think of a number between 1 and 10.

You didn’t think of 5.953, did you?

In the stock and other financial markets, many people who trade long-term or on higher timeframes don’t really think about the decimal points while taking their positions.

They use price levels like 10, 25, 100, or anything that’s simple.

This creates high volume at or near these psychological levels.

You can even see this in the open orders data.

But does this simple monkey brain phenomenon actually affect the price significantly?

Should you worry about these psychological levels? Or are they just nonsense?

I tested this monkey brain logic in the forex and stock markets.

I opened a chart, then identified the simple numbers with multiple zeros at the end, like 1, 10, 100, 150, 200, 500, 1000.

Then I counted how many times the price reacted from or near it, and how many times it ignored it completely.

And here are the results:

The psychological levels worked around 48% of the time in the forex market.

And around 48% of the time in the stock market as well.

Basically, there was a fifty fifty chance of price reacting to the psychological levels significantly.

But we all see the market slightly differently.

So, what’s significant to me won’t necessarily be significant to you.

Here are some examples of what I considered as significant price reactions from the psychological levels.

But since there was no clear sign of psychological price levels working, should we ignore them completely?

I wouldn’t.

In my 7-8 years of trading experience, I have seen multiple trades get affected by these psychological levels.

How?

Because many people still put their orders at the simple numbers.

When I also used to set orders at those simple numbers, they would not always get filled.

The price would reverse without filling the order just because there were too many orders in line.

Sometimes the entry would be missed, sometimes only half the order would get filled, sometimes the profit target would be missed even though the price reached it.

So, to fix this monkey brain problem, I started placing my orders in front of other monkey brain orders.

If I want to buy at the 100 price level, I know many will set their orders there.

So, I will set my order at 100.1, 100.50, and similar price levels.

Even though the data says the psychological levels work around 50% of the time, in the working 50%, you can improve your trade entry and profit booking points by setting them in front of other monkey brains.

That’s all!