Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Market Strategist with CMC FX.

Again, welcome to another educational lesson in the art of technical analysis. As always, this is simply for information and educational purposes only.

Recently, we've been talking about technical indicators, but one of the most important technical indicators that we should always be looking at is of course price and today we're going to be looking at price action itself on its own without any technical indicators whatsoever.

So, what exactly do we need to look for? Well the first thing is price itself is important because that's what's moving. In technical analysis, most indicators will be lagging and that will be following price.

Price is based on psychology. It's interesting, recently, I was at a gas station and I noticed how when people are filling up their gas tanks they will try to round things off. So in other words, they will try to round it off to £10, or even £20, or £30 and we tend to do that. Technical analysis is based on price itself and we as human beings tend to focus on very key specific numbers and that's what today's lesson is actually about. It's the numbers.

So I want to observe key numbers and I want to learn how to trade with the trend with these numbers itself.

So take a look at this chart over here. This is the Dow Jones daily chart. You'll notice that there is a line running across the top and the reason I have marked that line there is to indicate what was actually happening at a key price level. So at the 9,000 level the Dow Jones was struggling to break above there.

Now when we get to very important numbers like 9,000, 10,000, 11,000, we start observing that price itself will start to behave in a certain way. In this example here we had resistance. We also had a triple top pattern form right at the 9,000 level.

In this particular chart over here, what I've done is to show you again a daily chart but to highlight what we were observing at the 10,000 level. We noticed that the market found support in this price region. It stayed there for almost a week and a half and then started to rally. So the next major number becomes 11,000. So notice how right now the Dow has been almost reaching towards the 11,000 level. So these two psychological numbers are very, very important for the index.

Right now, as we are very close to the 11,000 level, we've popped just a little bit higher above there and I expect to see volatility. So as a trader, what we're looking for is when we get to these key levels, whether it's 11,000, 10,000, 9,000, or whatever the major number is, start observing that you will see most likely increase in volatility and also, this is where typically stocks are being held. So you'll again see more volatility in this area.

Now the FTSE, for example, on this particular chart here we can see that at the 5,000 level there was quite a bit of interest from the market. We had an all most triple bottom over a period of time. We had a definite double bottom just over in this section here. So the market found support at the double bottom and then of course rallied. Again, notice the round number 5,600. The market rejected that level over there and came back down towards major support at the 5,000 level and right now, the upside target becomes 6,000.

This one here, this is Cable, again we can take these round numbers. They don't have to be the 1,000 levels. We can also look at, for example, 0.70, 0.60, 0.50 and again, notice how the markets react at these key levels.

So whether you're a short-term intra-day trader trading currencies or whether you're trading commodities or even the indices, the round numbers, the psychological numbers as we refer to these as, are very, very important.

So always observe markets as they approach the major and the minor round numbers. There is an importance of increasing if the number coincides with other technical levels.

In other words, if we're getting 5,000 as a support level and we start to use other technical methods such as moving averages or even Fibonacci, or Elliott Wave counts and they coincide with these areas, that will prove to be much more important than just the actual number itself.

And of course, we want to trade with the trend. So if the trend is higher, we will be looking for support levels. We can of course look for resistance levels but it will be ideal to trade off the support levels to be buying into the market. If of course the trend is going down, then we would be looking to these key levels as support levels and of course, the upside will be the resistance numbers.

So whether you're trading towards a downside, towards the upside, always observe the key psychological numbers.

This is Sandy Jadeja. Look forward to being with you in another lesson for CantosCharts Masterclass.