Round Numbers

Published: 29. February 2024

Round numbers play a significant role in analyzing all types of markets. Just like resistance and support levels, round numbers are often points where the price may halt. Examples of this can be found in the markets every single day.

Many financial markets pause at round price levels, such as $50 for oil, which seem to exert an almost magnetic attraction on the price. Many inexperienced traders tend to sell or buy when the price reaches a round number, believing this level represents a fair valuation of what the price should be.

Additionally, larger investors or investment banks often place orders close to these levels, for example, $50,04, and since many orders are placed at the same level, these round numbers draw the price towards them. It often takes a very large volume of orders to absorb this, thereby creating a support or resistance level.

An example of this can be seen in the DAX index in the summer of 2023. Here, it’s observed that the price often pauses around 16 000, where it remains for a while. It may then break through, in one direction or the other, but the index tends to use 16 000 as a benchmark, pausing there for some time before moving on.

In the summer of 2023, the price of the DAX index regularly paused around 16 000 before breaking further up or down.