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Sentiment Indicator - Tips for Making a Successful Trade in the Forex Market



This article will be devoted to one of the informative indicators of fundamental analysis in the foreign exchange market, namely the sentiment indicator.

In general, the market sentiment indicator is an indicator of the buy-up rate of currencies, i.e. it shows the strength of different currencies in relation to each other, which currency is being bought by market participants at a given time, and which one trader are getting rid of.

Experienced speculators know that in order to earn money, you need to be in the minority, then there is someone to "take money" from. In this case, the Forex law is perfectly worked out, which sounds quite simple: "The market goes against the majority." If you trade Forex, you will agree with this.


Where can I find indicators from the sentiment indicator?

Different brokerage companies and dealing centers have a mood instrument that works according to a different algorithm, but there is no significant difference in the performance of different versions. The difference is due to the fact that the results of the market sentiment indicator can be shown on different time charts.

A significant drawback of the Forex sentiment indicator is that it shows only superficial information, and the fundamental factor is reflected in it when the market has already played important news.


Therefore, of course, you should not trust the market sentiment chart at all times, because it only serves as confirmation or refutation for entering a position. That is, of course, you should trust your trading system, but the sentiment indicator can give you an additional signal and, accordingly, a clear entry point.

How to interpret sentiment indicator readings? So, everything is pretty simple here! Let's take the USD \ CHF currency instrument as an example. As you can see, 77% of trading participants are actively buying dollars for Swiss francs (so to speak, bulls are in the lead). Or take the first option, for EUR \ USD, where 73% are already actively selling euros for dollars.

Peak signals for traders will be when one of the sides of the sentiment indicator is in the range of 95% and above. In this case, there is a high probability that the market is overbought or oversold; accordingly, the price may turn in the opposite direction from the current market trend.


Online informers for technical analysis

As a rule, these widgets include various simple tools for technical analysis, interpret their information and, based on a set of conclusions, make a summary.

Why are technical informers better than a sentiment indicator? The fact that he collects information using several tools, which increases the chances of a profitable trade. A significant disadvantage is that quite often the opinion of different tools of the informer system differs, therefore, it becomes difficult to determine in which direction to open a position.

Of course, like the sentiment indicator, the informer for complex technical analysis should not be overestimated and placed at the head of the trading system. These tools can provide strong points for entering a position, however, before opening a trade, you need to understand the market situation, compare the sentiment and informer indicators, and verify them with signals from your trading system. Only by using all this goodness in a complex, you can get good results and improve the statistics of profitable transactions.


In conclusion, I would like to say that in addition to computer programs and all sorts of indicators, special attention should be paid to iron discipline in trading and your own intuition. At first glance, this will seem trivial things, but whatever one may say, the further trading result depends on them. It is not uncommon in the market when one should simply observe when the risk is much greater than the profit.


Therefore, do not run after easy money, analyze the market thoroughly, adhere to the rules of your trading strategy in cold blood, test new trading tactics and gradually improve. As a result, you will gain invaluable experience that you can successfully apply not only on the currency exchange, but also in other areas of activity.





Published on: 9/16/20, 3:15 AM