For example, the EUR/USD chart below shows the projectible nature that can occur with IGCS. The highlighted are on the chart exhibits an increase in net short positions from retail traders which coincided with a rise in price action (EUR appreciation) on the price chart itself. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.
Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZD/USD-bullish contrarian trading bias. The main reason this sentiment indicator is regarded as contrarian stems from the objectives of retail and institutional traders.
Plan your trading
We have shown how sentiment/IGCS can be a unique, proprietary and potentially helpful addition to a trader’s approach. In subsequent IGCS articles in this market sentiment sub-module, we will go through the implementation and flexibility of this tool in varying trading circumstances. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you.
The top section of the diagram shows how price has evolved (black and green candles) and the blue/red sentiment line shows when traders are net long/ net short. If there is a large distance between the sentiment line and the price, this can be considered as a signal to trade in the direction of the trend. In the above diagram, price is in a strong up trend and sentiment is showing nearly three times more short traders for every long trader, therefore, this can be regarded ig client sentiment as a bullish signal. Readings that are below zero indicate a net short position in the pair, while readings above zero indicate that traders are net long in the pair. It is widely considered that readings greater than +2 and less than -2, indicate a meaningful bias among retail traders as this translates in to 66.6% of traders net-long/short. The two most well-known are open interest in options, which largely applies to stocks, and the Commitment of Traders Report (CoT).
IGCS AS A LEADING INDICATOR
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests FTSE 100 prices may continue to fall.
IG Product Updates
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/JPY-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/CHF-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias. With this strategy, one waits for the price to break the trend line and trade above the 200 EMA.
- Both fundamental and other technical techniques are used to gauge trends, ranges, potential reversals etc. so incorporating IGCS provides another layer of data to help verify a hypothesis.
- Find out more with our guide to trading with IG client sentiment data, as well as how to approach sentiment analysis in forex trading.
- The GBPUSD entered a strong downtrend through late 2016 and traded substantially lower, and most of the GBPUSD traders in our sample bought into these declines and thus remained net-long.
- We need to emphasize that past performance is not indicative of future results, but going against ‘the crowd’ in this instance could have produced approximately 600 points in gains.
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests France 40 prices may continue to fall.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CHF prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise.
Euro poised for minor rebound against dollar amid market uncertainty
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests France 40 prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.
Germany 40 IG Client Sentiment: Our data shows traders are now at their least net-long Germany 40 since May 07 when Germany 40 traded near 15,989.80. – DailyFX
Germany 40 IG Client Sentiment: Our data shows traders are now at their least net-long Germany 40 since May 07 when Germany 40 traded near 15,989.80..
Posted: Fri, 19 May 2023 07:00:00 GMT [source]
This means the tool might not be advantageous for scalpers and day traders as updates to IG client sentiment data don’t occur in real-time. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Alongside technical and fundamental analysis, client sentiment data can be a useful additional tool for a trader, if they know how to read the changes in positioning. Client sentiment, which looks at the number of long and short trades on a particular market, is a useful tool in a trading strategy.