The Psychology of Buying (and Selling)

Hello!

I wanted to write about something I've noticed ever since I've started trading, and it's really influenced the way I buy and sell positions. It's pretty arbitrary and honestly quite intriguing to me how many people do this, as this strategy (or habit) has no strategic value at all in itself. It's become a way for me to tell how many uninformed traders there are in a given coin that I'm researching. It's the bad habit of buying and selling at whole number prices.

Take a look:

As you can tell from this handy graph of DRGN/ETH's depth chart I got off of Kucoin, these two images show the difference between the sell orders at .0199 DRGN/ETH and .002 DRGN/ETH. Over 63,000 sell orders between a .0001 gap in price. That's almost equal to the entire sum of sell orders from .0183 (current price) and .0199 (price right before the "whole number"). This means that there will be massive resistance at .002 DRGN/ETH, and the number of buyers it will take to move it by .0001 DRGN/ETH at .0199 will be equal to the amount of buyers it takes to move it from .0183 to .0199.

That's crazy!! :O!!!

Seriously though, placing my buy orders like that essentially is just placing a big risk on myself. If the price hits .002, my order will most likely still not be filled, as there are literally tens of thousands of sellers in front of me. I'll almost certainly lose my opportunity to sell, and will have to depend on more buyers incoming in order to have my order filled. It's much more smart to place your order a few ticks below that, maybe at .0197 or something, and guarantee a sell at that price before the other sellers, in my opinion.

Basically, by recognizing this psychological phenomenon of buying and selling at whole numbers, I can effectively avoid a bunch of hassle by just setting my price a little above or below the whole number. It lets me essentially undercut the huge group instead of being stuck in line behind them.

Anyways, thanks again for reading, and if you found this article helpful or interesting, be sure to leave a like and comment any opinions you have on the matter yourself. Happy trading!

Fei