Knowing Market Sentiment in Forex Trading

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Knowing Market Sentiment in Forex Trading

Knowing Market Sentiment in Forex Trading As we know, in the forex market is often in the direction of the uncertain. This is what makes most traders become confused. This could be due to market sentiment. As a trader of course you have heard about market sentiment. Market sentiment is a consensus, or attitude of agreement with market participants in anticipating price movements.

Market sentiment is also called the main factor of price mobilization. This attitude is a combination of fundamental and technical factors. There is even a pattern of price formation, as well as the release of economic data. These are the factors that shape the perception of the investment market community. This also makes the market sentiment is considered as one method of analysis.

Term In Market Sentiment

As a trader, knowing the market sentiment is an obligation for you. This is because, market sentiment is the crew that is able to influence the direction and movement of the market. In the market sentiment itself, there are several terms that are often used such as:

  1. Bullish is a sentiment that reflects optimism. With this most traders tend to buy
  2. Bearish is the opposite more reflective of pessimism. Most traders are more likely to sell
  3. High risk appetite is more related to market conditions that are dominated by high risk among traders. This means that traders are optimistic with the condition and economic prospects. This is what makes investors dare to invest in high-risk assets.

For a trader and investor a market sentiment analysis, it includes an understanding of sentiment formation and how to profit from the existing sentiment. For that as a trader, you must understand market sentiment. As we know, price movements are basically the accumulation of investors and traders around the world. This is what makes the price can not be predicted with certainty.

Factors Shaping Market Sentiment and How to Overcome

The formation of market sentiment itself arises from a variety of factors. For example such as fundamental factors, technical, charts, patterns, global news, cycles or it could be due to the release of economic data. These various factors simultaneously form a perception in the forex market. If there is a dominant factor that makes up for example a bearish sentiment, then traders will anticipate the fall in prices.

How to anticipate it also varied, such as hedging, open sell or profit taking. The actions of these forex market participants, then that speed up the price movement by itself. This extreme movement, usually called falling knife. This is because, the price slid down like a falling knife.

How To Estimate Market Sentiment

To estimate the market sentiment itself, can be done in various ways. Can with, learn market information and read a lot. In addition, you can perform fundamental analysis. Although market consensus varies, but majority voices are usually more adherent to the principle of price movements and fundamental relationships.Unless, there are other fundamental contexts that can have a major impact. If there is such an event, you can focus on the release of economic data or the latest event, to analyze the market.

In addition to the above two ways, you can also estimate the market sentiment with attention to technical elements. Especially when the market is not dominated, by fundamental issues that have high impact. The concept of technical analysis that you can use to measure the market is:

  • Analysis of prices with support resistance
  • High lo price movements
  • Price action
  • Chart chart (triangle, head and shoulders, etc.)

The final way to estimate market sentiment, is to use brokerage tools or technology trading providers. Usually the tool, showing buyer and seller sentiment data. But this way of analysis, arguably has its weakness. This is because, this way can only measure market sentiments from certain trader groups only. For example, you use the brokers’ sentiment tool B. Then automatically, the market sentiment data you get only reflects the sentiment of broker B.

Benefits of using market sentiment indicators:

  1. Can provide a broader view for you, about how to maneuver traders in the forex market.
  2. Sentiment indicators can remind you. Especially when there is a possibility of a price reversal in the near future
  3. Using this indicator, you can confirm the current trend
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