Significance Reference Points

Significance Reference Points - defined as anything that causes trader's expectations to be raised about the possibility at something happening. They are points where a large number of traders have taken opposing positions. Based on these expectations, they will continue to hold a position in the belief that the expectation will be fulfilled, and most important, they will likely liquidate a position as a result of expectations being unfulfilled.

Where opposing forces (traders with opposite beliefs about the future) have taken a stand, where they have, in their minds, prescribed for the market very limited ways for it to behave, and either/or situation.

The more significance the reference point, the greater the effect traders will have on prices, as balance of power will shift dramatically between two opposing forces at these points.

Reference points are price levels where many traders on side of the market are very likely to give up their beliefs about the future, whereas the other side will have their beliefs about their future reinforced.

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