How to determine market sentiment?

  • Mar 31 2021
  • by
  • Analyst AZA
How to determine market sentiment?

Indicators that determine the mood of the market

This article touches on the mood of financial markets, namely, what specific tools are used by forex market players, investors, and speculators, entering the financial market.
In other words, the success of a trader largely depends on how much he can know and understand the psychology of the participants of the exchange, and also have an idea about the indicators of market sentiment.
What is the indicator of market sentiment?
To determine the dynamics of buying/selling currency (or another instrument) for a fixed time interval, forex traders use special tools - mood indicators.
This tool is a graphical or digital information panel.
The model shows us statistics data - information about the preferences of a group of traders regarding the prevailing situation on the stock exchange.
Using indicators of market sentiment, you can more deeply understand and consider the following issues:
1. If to look from the point of view of the quantitative relation: how it specifically affects the market reaction or the future development of the situation.
The analyzed criteria are macroeconomic phenomena, unemployment rate, inflation, and several other factors.
2. In general, the mood of market participants.
This aspect will show how traders react to the future behavior of the price of the currency.
If you understand this tool and learn how to skillfully use the moods of market participants, in turn, be able to react correctly (to the level of pessimistic/optimistic sentiments), when in reality you can get a good level of income.
For example, you can consider a situation where bulls predominate (bullish sentiments predominate).
This group, most likely, has already opened or plans to open long positions, as it is in anticipation of further growth in the value of the asset.
Also, you can consider a bearish point of view: they are convinced that the price of the instrument must necessarily go down, and for this purpose, they open or are about to open short transactions.
But one way or another, the probability is too small, that this state of affairs will last a fairly decent time: everything has its limit.
A model of the market where there are only buyers or sellers is simply meaningless, so it can not exist and continue for a long time, and it is extremely important for a trader not to miss the peak of uncontrollable growth - when bullish or bearish sentiment rises.
The player must be able to retreat in time and open a new deal, hoping to change the trend.
The situation, when a lot of financial experts - over 60%, take bullish sentiments or bearish, just now the direction of the market is changing.
In other words, the trend is recognized by the majority of players, and the trend is gaining followers, then there is a turn.
Such science as statistics demonstrates to us that the term of consolidation of investors and traders occupies a large time interval in its existence, or on the contrary, a weakly expressed bull or bearish tendency.
For the player in this situation, which was created on the exchange, the most important task is to determine the leading group of members with bullish or bearish sentiments, and then join their ranks and continue trading within the conditions of their tactics for the growth and development of the prevailing market direction.
That is why, before taking any steps in the foreign exchange market and understanding the possible consequences, namely its impact on financial instruments.
It is necessary to take into account all possible risks and be based on the dominant mood of traders.
How to find a way out?
To act so that with each decision taken at the exchange, the player's position becomes better: you need to constantly measure the situation on the market.
Special means have been created for these purposes.
One of the most effective instrument-meters of market sentiment is the  «Cayman» indicator.
This tool provides a system - a series of consistent and clear actions that ultimately show market expectations.
The point is that the ratio of «buyer-seller» is calculated from the total number of participants-traders.
How does this indicator function?
The principle of its operation is based on all the statistics of the exchange, and it shows that the majority of employees of brokerage companies remain without earnings due to the feeling of hardness: a popular reflex is triggered - wherever everything goes, there I am.
This situation is very attractive for experienced exchange players who base their decisions on analytics, information, and statistics, analyzing and reflecting, and not as much as they are guided by the emotional aspect.
Having fixed the target orientation of the main part of the market participants, one can not be afraid and take the opposite position boldly.
In this situation, without the «Cayman» simply can not do.
After all, this indicator solves several such important tasks:
- Detects potentially possible extremes - the maximum or minimum market values ​​that indicate a trend break;
- focusing on this tool, a trader can always be in a favorable position - to have a favorable position and earn;
- Another important advantage of the indicator is that the trader can determine overbought or oversold zones.
Day-to-day trading also uses this indicator, so transactions open up, deviating from the critical parameters.
As a rule, Cayman shows the best results on H1 and timeframes higher.
At 15-minute intervals, it is better to use it if the trade is conducted by high-volatility pairs, for example, EUR / USD.
This indicator of sentiment shows us the proportion - the ratio of traders, buyers, and sellers.
Working with him, you can have an idea of ​​the majority of the forex market, and take the opposite position.
So, you can earn.

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To act so that with each decision taken at the exchange, the player's position becomes better: you need to constantly measure the situation on the market.

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