How To Find A Price Level That Continuously Holds

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Trading the Same Price Level More than Once

Finding a price level that continuously holds over and over again can be very profitable. It comes up fairly rarely, but occasionally you will find a level in the market that holds every time and tends to consolidate along that price level for extended periods of time yet never quite breaks through it. But when I do find one of these, they usually tend to be among the most profitable since a trade can be taken on each touch of the level, leading to a higher volume of (potentially) winning trades.

On the EUR/USD today (May 27), I took six put options within roughly half an hour (all denoted with red arrows in the image below) – starting with the 3:50AM candle – winning five out of the six. At this point, although we were in a general uptrend for the morning, three of the past four candles were bearish. This suggested to me that we were probably going to undergo a period of consolidation or even a retracement back down to previous levels in the market. I actually expected the pair to retrace back down to the previous minor resistance level of 1.2937 before likely heading back up again to maybe challenge 1.3000. But it simply consolidated for a long period of time before getting back down to 1.2937 several hours later.

After my first put option, I decided to take another on the very next candle given that the 3:50 candle showed a strong rejection of 1.2943. The 3:55 candle showed more bearish rejection so I decided to take another trade on the 4:00 candle again at the touch of 1.2943. The 4:05 candle didn’t quite make it up that price level so I did not take a trade, but given that I was taking 10-minute expiries on these trades I was already 3/3 on the day. The 4:10 candle touched 1.2943 again and I took another put option, producing another winner. I did the same on the next candle, and although this trade ended up being a one-pip loser I took another trade on the 4:20 candle, which won and gave me a 5/6 day.

I decided not to trade 1.2943 after that point. Price was mainly sticking above 1.2942 and not dipping down any further so I felt that the EUR/USD still had some upward bias and was bound to break out of this consolidation pattern at any time. My judgment seemed to be validated on the 4:30 candle, although this turned out to be a false break and 1.2943 continued to hold over and over again. But since I was wary of the pair finally making a genuine breach of 1.2943 I decided to simply exercise patience and watch only. However, if I had decided to take further put options at the 1.2943 level I would have won another eight consecutive trades just on that price level alone.

It would have been a very nice haul for the day to have over a dozen winning trades with minimal losses, but staying disciplined and trusting your judgment is always better than simply trading to trade. Always remember that it’s imperative not to trade just because you are bored sitting at your computer and you’re eager to make money. Trading out of boredom can be just as harmful as trading by emotion. Both will only lead to lost capital. Some days you might have five or more sound trading opportunities on a given currency pair; and some days you may very not have any. I have gone days where I simply don’t make a trade if I’m not comfortable taking any. You should never have the feeling that you absolutely NEED to trade. Going 0/0 on the day could reasonably be considered a good trading day in and of itself, as maintaining self-discipline and sticking to only the best binary trading opportunities available to you is essential in order to become a consistently successful trader.

How to Calculate Change in Price Levels

How to Calculate Cost of Living Wage Increase

Over time, the average price of goods and services in the economy can increase or decrease. To calculate the percentage change in price levels, subtract the base index from the new index and divide the result by the base index.

An aggregate increase in price levels is called inflation, and a decrease indicates deflation. The U.S. Federal Reserve can enact monetary policies to stabilize inflation rates, but prices generally tend to increase over time. That’s because the Federal Reserve aims for the economy to experience 2 percent annual inflation. As inflation incurs and price levels increase, the purchasing power of a dollar decreases.

If you want to measure the change in aggregate prices for certain consumer products, the consumer price index is your best source of information. The Bureau of Labor Statistics reports monthly and annual consumer price index information. Each index represents the price of a basket of goods relative to an average price level based on 1982 to 1984 data. For example, an index of 110 means that prices for that basket of goods are 110 percent of the average price in the 1980s.

  1. Find the source of data for your information. Navigate to the Bureau of Labor Statistics’ annual report page to get comparative data and note the index points for the product you want to measure.
  2. Identify the base index level and the new index level for the product you’re interested in. For example, if you want to calculate the change in the price of alcoholic beverages from 2005 to 2006, the base index would be 195.9 index points and the new index would be 200.7 index points.
  3. Subtract the base index from the newer index. In this example that would be 200.7 minus 195.9, or 4.8.
  4. Divide the difference in index points by the base index to find the percentage change in price. In this example, that would be 4.8 divided by 195.9, or 2.5 percent. Between 2005 and 2006, prices on alcohol rose 2.5 percent.

TL;DR (Too Long; Didn’t Read)

In addition to consumer price levels, the Bureau of Labor Statistics also publishes information about the producer price index, which is the prices that producers pay for goods.

Price Level

What Is a Price Level?

A price level is the average of current prices across the entire spectrum of goods and services produced in the economy. In more general terms, price level refers to the price or cost of a good, service, or security in the economy.

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Price levels may be expressed in small ranges, such as ticks with securities prices, or presented as a discrete value such as a dollar figure.

In economics, price levels are a key indicator and are closely watched by economists. They play an important role in the purchasing power of consumers as well as the sale of goods and services. it also plays an important part in the supply-demand chain.

Understanding Price Levels

There are two meanings of the term price level in the world of business.

The first is what most people are accustomed to hearing about: the price of goods and services or the amount of money a consumer or other entity is required to give up to purchase a good, service, or security in the economy. Prices rise as demand increases and drop when demand decreases.

This is used as a reference to inflation and deflation, or the rise and fall of prices in the economy. If the prices of goods and services rise too quickly—when an economy experiences inflation—a central bank can step in and tighten its monetary policy and raises interest rates. This, in turn, decreases the amount of money in the system, thereby decreasing aggregate demand. If prices drop too quickly, the central bank can do the reverse: loosen its monetary policy, thereby increasing the economy’s money supply and aggregate demand.

The other meaning of price level refers to the price of assets traded on the market such as a stock or a bond, which is often referred to as support and resistance. As in the case of the definition of price in the economy, demand for the security increases when its price drops. This forms the support line. When the price increases, a sell-off occurs, cutting off demand. This is where the resistance zone lies.

Price Level

Price Levels in the Economy

In economics, price level refers to the buying power of money or inflation. In other words, economists describe the state of the economy by looking at how much people can buy with the same dollar of currency. The most common price level index is the consumer price index (CPI).

The price level is analyzed through a basket of goods approach, in which a collection of consumer-based goods and services is examined in aggregate. Changes in the aggregate price over time push the index measuring the basket of goods higher. Weighted averages are typically used rather than geometric means. Price levels provide a snapshot of prices at a given time, making it possible to review changes in the broad price level over time. As prices rise (inflation) or fall (deflation), consumer demand for goods is also affected. This leads to broad production measures such as gross domestic product (GDP) higher or lower.

Price levels are one of the most watched economic indicators in the world. Economists widely believe that prices should stay relatively stable year to year so they don’t cause undue inflation. If price levels rise too quickly, central bankers or governments look for ways to decrease the money supply or the aggregate demand for goods and services.

Although prices change gradually over time during inflationary periods, they can change more than once a day when an economy experiences hyperinflation.

Key Takeaways

  • The price level is the average of the current price of goods and services produced in the economy.
  • Price levels are expressed in small ranges or as discrete values such as dollar figures.
  • Price levels are a leading indicator in the economy; rising prices indicate higher demand leading to inflation, while declining prices indicate lower demand or deflation.
  • In the investment world, the price level is referred to as support and resistance, which help define entry and exit points.

Price Level in the Investment World

Traders and investors make money by buying and selling securities. They buy and sell when the price reaches a certain level. These price levels are referred to as support and resistance. Traders use these areas of support and resistance to define entry and exit points.

Support is a price level where a downtrend is expected to pause due to a concentration of demand. As the price of a security drops, demand for the shares increases, forming the support line. Meanwhile, resistance zones arise due to a sell-off when prices increase.

Once an area or zone of support or resistance is identified, it provides valuable potential trade entry or exit points. This is because, as a price reaches a point of support or resistance, it will do one of two things: bounce back away from the support or resistance level, or violate the price level and continue in its direction until it hits the next support or resistance level.

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