Trading Opportunities (13)

Forex sentiment analysis

What is the contrarian approach to client sentiment

The contrarian approach to client sentiment is when a trader would look to take a trade in the opposite direction of the majority traders in the market. Meaning, if the majority are selling an instrument, look for buy opportunities, and, similarly, if the majority are buying an instrument, look for sell opportunities.

The contrarian approach is the most used sentiment trading strategy.

Our approach

We are always looking to take trades in the direction of the current trend, not trying to pick tops or bottoms. In other words, if the trend is bullish, and the sentiment is short, we're looking for buy opportunities; if the trend is bearish, and the sentiment is long, we're looking for sell opportunities.

Forex sentiment rules

• Entering a trade
  Client sentiment should not be used alone, but in combination with your technical and fundamental analysis. It should be treated as a confirmation indicator along with all the other trading rules.
• Assets / Instruments
  Client sentiment bias is more accurate for assets or forex pairs with higher trading volume, like all USD majors (EUR/USD, USD/JPY, etc ...) or major indices. When showing the client sentiment, we put first the most traded instruments.
• Timeframes
  Client sentiment gives best results when trading higher timeframes, like hourly, 4 hourly or daily.
• Sources
  Good decisions need to be based on reliable data. Our forex sentiment data is generally representative and not just taken from one (or some) brokers.
• Forex sentiment indicator
  There are different ways of using the client sentiment in trading, but the majority of traders are using the client sentiment as a contrarian indicator.

Learning more about it

• Sentiment Analysis, from BabyPips