It is not common to read about the greatness of numbers in human life, because: “numbers scare people”. But numbers are basically the most important creation human mind could bring into their life. When we look back, we can realize they are almost the tools that allow human to know how to build the civilization in all aspects: productions, constructions, mechanics, medicals, technologies, etc. Nowadays, all the technologies we enjoy are based on numbers, binary numbers 0 and 1. And we also find in Genesis (bible) that God took 1 to 7 days to create earth with humans being included.
The forex as one of the biggest financial and trading market on earth is by fact a universe of numbers by excellence. Let’s go digging to understand: how numbers are moving forex activities? what numbers we need to put focus on? and in fact how to dance with numbers in order to take accurate forex trading decisions? Our first recommendation to every trader is to have: 1) good money management and 2) a solid trading system; then they can access to more documentation about forex trading to develop their skills. In this order, we expose below some information about the meaning of numbers in forex.

How numbers are moving forex activities?
Forex market as financial activities based on money movements is measured on price dynamism between currency pairs. By the interdependence principle in the speculative finance world, the price dynamism involves the pairs’ dynamism among all the currency pairs and different exchanged values present on the market. Then, the price movements in this entire speculative financial world are done by 3 factors:
a) the economic announcements called news calendar,
b) government interventions in the economies,
c) the big banks, multinational enterprises and institutions decisions.
Around 20% of those factors are responsible for almost 80% of the market price movements (Pareto law). This relation 20/80 we will find in many aspects in forex trading: the indicators’ configuration, the ratios, etc. With the news calendar, we analyze preferentially the targeted as high impact news that have a significant differential between the previous and the forecast numbers.
Obviously, first we have to use some numbers to put the trend on our side: for market trend's detection we have cross EMA or MA 20, 100 and 200. And to know how the market is trending or ranging, we can interpret some numbers presented by the ADX indicator: below 25 and above 50 the market is ranging, from 25 to50 the market is trending.
What numbers we need to put spotlight on?
Apparently, in the forex market the numbers are everywhere and in everything. Many successful traders rely on the secret of knowing what the numbers to put focus on. For trading purposes, we can divide numbers in 3 categories: the static, semi-static and the dynamic ones.
The static numbers: they stay frozen in the price historical data, and they constitute the historical support and resistance zones or lines we can identify them easily going to daily or weekly charts. For example: the previous high/low points on daily, weekly and monthly basis. Other static numbers could be some specific amount of pips we have to consider when the market is making big moves trending or ranging. Those numbers could be: 300, 500, 800, 1000, 1300, 1500…

The market trend or range used to make big waves/corrections moves accumulating round big numbers of pips: 300, 500, 800, 1000, 1300 and 1500 pips... Then, if the wave takes 800 pips we can expect some 300 pips or 500 pips on correction. Those numbers may serve as massive support/resistance zones. They can be key numbers to identify typical supply/demand zones.
We have to pay attention to the chart figures market price is presenting around those numbers to catch the signals of the next moves the market will experiment. And mostly we can use some indicators like the Stochastic 20/80 or better a RSI 30/70 to get more precisions about overbought/oversold conditions that help envisioning new market price directions.
Also the previous high/low points on daily, weekly and monthly are critical levels to guide us on where we can expect rebounds, pullbacks or rallies, mostly on the weekly and monthly high/low basis.

The semi-static numbers are some ratios, percentages or numbers that will go changing gradually or not with the market flow. Considering the timeframe we use, those numbers are somehow stable for relatively long periods. In this category we have the Fibonacci ratios (with all included: fan, extensions, arc, projections, etc.) and the Gann ratios. The readers can easily search on internet all details about those considered golden numbers in trading. We prefer to talk in this article about other relevant numbers in forex trading.
And talking about golden numbers, we can’t forget the number 3. This number is repeated over and over again everywhere in trading. We have 3 types of many things: trend (up, down, flat), trading style (scalper, swing traders, long term traders), trend timing (major, intermediary, minor), 3 supports and 3 resistance, etc. In many other aspects in trading 3 or the third point seems to be a breaking level that traders need to evaluate: third candle, third wave (the hugest one), third support or resistance, etc.
The dynamic numbers are numbers that are moving constantly as the market keep rolling. In this category we have:
a) the pivots points: daily, weekly and monthly
b) market price support and resistance points: daily, weekly and monthly
c) the current high/low points: daily, weekly and monthly
d) the Tom Demark numbers.
No matter what trading strategies or trading style traders have, by somehow traders will use the dynamic numbers. If they don't, it is simple: those numbers will work badly on their trading decisions. Before we continue explaining how the dynamic numbers work; here again we have to refresh two important principles:
1) the principle of timing leverage in trading: the highest timeframe elements have predominance on the lower ones.
2) The principle of market price pattern repetition: “Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.” Alan Farley.
The pivot points on weekly and monthly basis could be considered as inflection points: the points where the market price validates if the bulls are winning against the bears and vice versa. And the market price support and resistance points illustrate from minor to major grade where the dynamic supply and demand zones are.
The current high/low points on daily, weekly and monthly basis are levels that confirm specific zones where the market price took a break to either continue or rebound back. Those zones could be interesting to help them take wise trading decisions
Caution! the monthly components (pivots, supports/resistances, high/low) are useless in the first week of the month, because logically the market does not accumulate enough data. In this case the weekly data represent our major reference.
And if we have numbers everywhere in forex trading, why each market candle doesn’t represent a number? Obviously someone has the right to answer this question: Tom Demark. In the TDmark Combo, here we will look at the TD sequences only. The TD sequences prove that the market starts moving from the candle number 1 and at candle number 4 it could take a break or rebound; if the market doesn’t rebound back, the move could continue to candle 8-9-10. But the big number here is the candle 9 considered as a reversal candle, whereas the reversal movement can happen on the candles 7,8 or 10,11 too. If the market price keeps moving on candle 11th, we will wait for the reversal around candle 14th.

In forex trading numbers are what laws represent in a society operation: they will affect your path no matter you know and you use them or not. In this case, the choice is clear that you can have better results in your career as a trader if you learn how to manage numbers. Numbers are not everything, but they constitute another big element we better use to cross verify trading decisions.
“To take good trading decisions you do not need to be a professional in mathematics, but you might learn how to dance with numbers as your partner in the tango dancing party represented by the trading universe.”

Copyright 2013 by Forexgrange
Translate to English Show original