What is retail sentiment?
Have you ever noticed on your broker site that it has a statement along the lines of "70%+ of retail traders lose money"???
This is directly related to retail sentiment - in short, institutional money make their money on others losing money in the online marketplace.
Every forex trader will always have an opinion about the market.
“It’s a bear market, everything is going to hell!”
“Things are looking bright. I’m pretty bullish on the markets right now.”
Regardless of the technical analysis or the news that comes out, traders often get it wrong.
There's some simple logic to this, If you look into COT reports (Commitment of Traders) 🍪 see the last COT post if you're not familiar with COT. Well in addition to COT there is also a tool called sentiment - this info shows what traders are doing on global broker platforms such as IG index.
In this current condition and at this precise time it has a mixed bag of;
SPX 47% of retail are long - now you would assume with a long stock market it would correlate to a weaker DXY situation, yet retail are also 57% to the short side on EURUSD. Which makes very little sense. Now assume this is only a small minority on one platform like IG index.
Well - with another look, you will see retail are currently;
Long - USDJPY 67% (Long DXY)
Short AUDUSD 63% (also long DXY)
However, 76% long USDCAD - and then long Gold 83%.
Do all the numbers match up?
Knowing 70% or more of retail traders lose money - what would you say?
Unfortunately, since the forex market is traded over-the-counter, it doesn’t have a centralized market. This means that the volume of each currency traded cannot be easily measured, but again this is where COT can be used in parallel to the sentiment. This might be 👽 to you right now. But it's a very powerful tool.
On the COT side, you can see into the volume traded and will notice if brokers are net-long, institutional investors are often net-short. Buyers need sellers.
It's as simple as that.
IG sentiment can be found here - www.dailyfx.com/sentiment
Hope this helps someone.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Have you ever noticed on your broker site that it has a statement along the lines of "70%+ of retail traders lose money"???
This is directly related to retail sentiment - in short, institutional money make their money on others losing money in the online marketplace.
Every forex trader will always have an opinion about the market.
“It’s a bear market, everything is going to hell!”
“Things are looking bright. I’m pretty bullish on the markets right now.”
Regardless of the technical analysis or the news that comes out, traders often get it wrong.
There's some simple logic to this, If you look into COT reports (Commitment of Traders) 🍪 see the last COT post if you're not familiar with COT. Well in addition to COT there is also a tool called sentiment - this info shows what traders are doing on global broker platforms such as IG index.
In this current condition and at this precise time it has a mixed bag of;
SPX 47% of retail are long - now you would assume with a long stock market it would correlate to a weaker DXY situation, yet retail are also 57% to the short side on EURUSD. Which makes very little sense. Now assume this is only a small minority on one platform like IG index.
Well - with another look, you will see retail are currently;
Long - USDJPY 67% (Long DXY)
Short AUDUSD 63% (also long DXY)
However, 76% long USDCAD - and then long Gold 83%.
Do all the numbers match up?
Knowing 70% or more of retail traders lose money - what would you say?
Unfortunately, since the forex market is traded over-the-counter, it doesn’t have a centralized market. This means that the volume of each currency traded cannot be easily measured, but again this is where COT can be used in parallel to the sentiment. This might be 👽 to you right now. But it's a very powerful tool.
On the COT side, you can see into the volume traded and will notice if brokers are net-long, institutional investors are often net-short. Buyers need sellers.
It's as simple as that.
IG sentiment can be found here - www.dailyfx.com/sentiment
Hope this helps someone.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
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Master the Art of Trading: amzn.to/3nUfB9r
Prop firm partners (FTMO)
shorturl.at/hBEQ4
