Maybe we're already doing that, but we're using a more respectable title like, pure mathematics. -Ross
Back to topic.... An example of how my emotional chart works is this... .99, .24, .01, .89, and .76 are some of the most important numbers within a dollar. psychologically, humans "feel" better when they buy a car for 58,999...that same car for 59,001 would take longer to sell. There is an entire discipline of price psychology but that's not for now. Basically, the emotional metric of the human starts to rise as he/she approaches any of these numbers within the dollar. Ofcourse one must be experienced to then know what to do and when but it is interesting that you can have a chart full of zone indicators such as "perceived discount", "perceived overpay" etc... and have even better signals than the traditional technicals that can be a bit behind. -Ross
If you look at say 500 million shares traded in the Dow components over a period of 5-10 years, at various times of day, various market conditions, various quarters, etc... you will find that your chart will have price congestion at certain numbers... Remember, trading stks is still just buying or selling, that's it. The culture of buying and selling is based as much on price perception as anything else. Next time you go to the grocery store see how many prices for goods are at .99, .89, .74 vs. .01 .00, .76. etc... The professional trader, the mutual fund holder, the trader in his kitchen and the wealthy hedge fund manager all have something in common...they all see these price pivots in the real world everyday. This all important data, or bias is brought into the market, you therefore see a mirror of the same gravitation towards prices used for produce, dry goods, cars, houses, bentley's, toyota's and stocks. -Ross
Personally, I think this is a long running myth, mistake, incorrect reading of human pyschology. Zeros indicate small, low, less, cheap ... I am more drawn to zeros then nines when making purchasing decisions. Would you go long at 99.99? or 100? I'd rather buy a burger for $2.00 than $1.99 perhaps, its just me.
Yes, That is just you...remember you are a trader so these studies are not based on experienced traders but the larger generic investor, I would venture to say you will rarely see a national campaign for a 2 dollar anything but you will see .99 cent this or that, In fact the $2 bill was discontinued years ago because of its "unpopularity." -Ross