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Author Topic: Why is crossing any whole dollar price so psychologially difficult?  (Read 1718 times)
dancupid
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September 30, 2011, 04:44:19 PM
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Why is crossing $5 such a boundary? How can an arbitrary number have such psychological significance and influence?
$5 is currently £3.209 in pounds sterling - there is no psychological pressure for a move to £3.21.
Just wondering.
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September 30, 2011, 04:49:36 PM
 #2

Why are products always $9.99?
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September 30, 2011, 05:00:37 PM
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I was asking this awhile back when there was a €10 wall for a long time.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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September 30, 2011, 05:22:19 PM
 #4

When people input orders they usually choose round numbers. Say you have 100 Bitcoins and you want to sell them. The price is at 4.78 and you think: "Maybe it will go up to 5 so I can cash $500". So you put a sell order at $5. These barriers are made by people so you should expect some "regular" numbers ($5.1, $5, $5.35 are much more likely than $5.2412413)

Of course this doesn't always happen. Sometimes the barriers are also related to supports/resistances from technical analysis.
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October 01, 2011, 02:56:50 AM
 #5

People make a big deal of the Dow Jones index falling below 10,000 (it will do so again shortly) but not 10,100 points.  People like to watch the odometer in their car tick over to 100,000km but don't give a toss about 99,912.  We like nice whole numbers that look pretty, even if they have no real significance.  I personally like to place my trades at $5.072912 or something just to make it random.

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October 01, 2011, 03:02:03 AM
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When people input orders they usually choose round numbers. Say you have 100 Bitcoins and you want to sell them. The price is at 4.78 and you think: "Maybe it will go up to 5 so I can cash $500". So you put a sell order at $5. These barriers are made by people so you should expect some "regular" numbers ($5.1, $5, $5.35 are much more likely than $5.2412413)

Of course this doesn't always happen. Sometimes the barriers are also related to supports/resistances from technical analysis.

also, it's our conditioning to base 10.

in base 9 for example using a satoshi as the base unit, 5.00000000 translates to 12.54748045.

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October 01, 2011, 04:12:24 AM
 #7

I personally like to place my trades at $5.072912 or something just to make it random.

I do that too. I think about what will be the highest/lowest price and then I add random decimal places to it.  Cool
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October 01, 2011, 04:40:59 AM
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If you add random decimal places then your order is more likely to go through in one shot, versus multiple trades as the value bounces above or below your nice round psychological number.
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October 01, 2011, 09:01:09 AM
 #9

Same phenomenon occurs in the stock market. Whole dollar barrier philosophy, it is just a price point that incurs a particular psychological
response. Generally (in the stock market anyways) on cheaper priced equities even the quarter (0.25) and the half (0.50) can be significant
psychological price point barriers.


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October 03, 2011, 05:08:38 PM
 #10

It's not a much of a barrier any more. The price has been around $5 +- $0.20 for two days now, crossing the $5 mark repeatedly.
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October 03, 2011, 10:16:09 PM
 #11

It's not a much of a barrier any more. The price has been around $5 +- $0.20 for two days now, crossing the $5 mark repeatedly.


Well no, it is not still considered a price "barrier", once the price point has been penetrated multiple times in a short period of time
it no longer acts as a barrier, but it can/could act as a bit of a price magnet. Once again, I am not sure if stock market trading
psychology fully transfers over to the trading/price action of BTC. Either way, in the end Supply and Demand determine
price.


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October 03, 2011, 11:09:47 PM
 #12

Bitcoin's stagnant price around $5 is terrible news for investors, but great for people who want to use it as a currency.  Imagine being a merchant selling products in bitcoins, and seeing bitcoins' value swing 20% on a daily basis.  Few merchants would tolerate such violent swings that could put them at a profit or loss on a daily basis.  Such swings were common during some trading days of the past few months.

A stagnant price gives merchants certainty.  If bitcoins remain valued at $5 until at least the end of the year that would be the best thing for bitcoin's future. 

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nmat
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October 04, 2011, 03:35:17 AM
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So, have we scared off the 'speculators'?

I do not believe so. There was a similar stagnation during the last 10 days of July and look where we are now...
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October 04, 2011, 06:42:54 AM
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Darn those speculators, leaving and taking what little is left of their money with them.  Darn them to HECK!
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October 04, 2011, 11:41:56 AM
 #15

I have never seen a news story say "The DOW fell below 9781!!!"

Also, you might have 1000 Bitcoins and want $10,000 so you sell at $10. It is a lot different from having $9,940 psychologically even though that is only $60.

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October 05, 2011, 04:31:28 PM
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People make a big deal of the Dow Jones index falling below 10,000 (it will do so again shortly) but not 10,100 points.  People like to watch the odometer in their car tick over to 100,000km but don't give a toss about 99,912.  We like nice whole numbers that look pretty, even if they have no real significance.  I personally like to place my trades at $5.072912 or something just to make it random.


I do that too, but mainly so I can see my trades execute in the ticker
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