One of the strategy options is to assess market sentiment and trade in its direction. The trader has the task of determining which mood prevails: bullish or bearish. If the market is optimistic, then open trades on a bullish trend, if pessimistic – on a bearish one. The only question is how to determine this mood. A growing trend may simply be a correction or a local reaction to the news. And maybe even a reaction of speculators or a game of market makers. The Sentiment indicator will help determine market sentiment.

Sentiment indicator: we define market sentiment

This indicator is a percentage scale that shows the number of traders who trade on a rise or fall in price. Essentially, the market indicator Sentiment analyzes the glass of prices at a specified time period in the settings.

Trading Terms:

  • Timeframe – 1 day.
  • Asset – GBP / USD.
  • Sentiment indicator settings: Period = 12, Mode = Fast.

The principle of opening a long position:

  • The Sentiment indicator displays 5 bars (or more) below the zero level chart. Each column should be more growing in comparison with the previous one. The color of the bars is red.
  • The next bar is also growing, but smaller in magnitude of the previous one.

Open a deal on the next candle with a stop of 100-150 points.

The principle of opening a short position:

  • The Sentiment indicator displays 5 bars (or more) below the zero level chart. Each column should be more growing in comparison with the previous one. The color of the bars is blue.
  • The next bar is also growing, but smaller in magnitude of the previous one.

Open a deal on the next candle with a stop of 100-150 points. Exit from the market is individual, depending on the volatility of the pair. You can add the ATR indicator for its analysis.

Strategy, we think is clear. And now about the fly in the ointment. This indicator is called very unreliable for several reasons:

  • There is no guarantee that the broker really reflects the full statistics on the market, and does not manipulate interest.
  • There is no understanding of how the Sentiment indicator is calculated.
  • It is not known how often the broker processes requests and how often statistics are updated.
  • In practice, about 80% of traders lose money due to inexperience. This means that focusing on a glass of prices, you repeat the actions of the majority, joining those traders who suffer losses.

Should I use the proposed strategy? We think it is worthwhile to at least understand how the market works, which indicators have flaws and how to level them. As practice shows, this strategy is working, but difficult. If you are still ready to test it, write about it in the comments and we will send you an indicator template for free by email.

Leave a Reply

Your email address will not be published. Required fields are marked *