Sentiment in the Forex Market

Indicators and Strategies to Profit From Crowd Behavior and Market Extremes

Crowds move markets and at major market turning points, the crowds are almost always wrong. When crowd sentiment is overwhelmingly positive or overwhelmingly negative – it's a signal that the trend is exhausted and the market is ready to move powerfully in the opposite direction. Sentiment has long been a tool used by equity, futures, and options traders.

In Sentiment in the Forex Market, FXCM analyst Jaime Saettele applies sentiment analysis to the currency market, using both traditional and new sentiment indicators, including: Commitment of Traders reports; time cycles; pivot points; oscillators; and Fibonacci time and price ratios. He also explains how to interpret news coverage of the markets to get a sense of when participants have become overly bullish or bearish. Saettele points out that several famous traders such as George Soros made huge profits by identifying shifts in crowd sentiment at major market turning points. Many individual traders lose money in the currency market, Saettele asserts, because they are too short-term oriented and trade impulsively. He believes retail traders would be much more successful if they adopted a longer-term, contrarian approach, utilizing sentiment indicators to position themselves at the beginning points of major trends.

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If you have any questions about the material covered in my book, please free to ask me here. Also feel free to discuss topic with other traders under the Trader Sentiment & Positioning forum.

~ Jamie Saettele

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Jamie Saettele is the author of Daily Technicals, Currency Crosses, and COT on DailyFX.com. He is also the author of the recently published Sentiment in the Forex Market.

congratulations, jamie.

thank you...if anyone has questions then please do not hesitate to ask those questions here

__________________
Jamie Saettele is the author of Daily Technicals, Currency Crosses, and COT on DailyFX.com. He is also the author of the recently published Sentiment in the Forex Market.

i will start

you once showed a chart with some of YOUR OWN sentiment indicators, could you please explain a bit about that? where do you get the information from that you are working with and how do you process it?

all i have a look at is the COT report..

Hi Every body,
Crowd sentiment is the leader in the market which can move the price up or down.The market itself is made up of people and their beliefs.You are trading your beliefs in the market.When you believe the dollar is going to be strong you buy it, the other way round, you believe dollar is going to be weak you sell it.The consolidation zones are battling areas of these two types of believers.That is one of reasons it is very difficult to predict the market with 100 percent accuracy.Candlesticks shows the foot prints of money and sentiment for that particular time frame.The sentiment is visible in the candle stick and to some extent it is also measurable. By seeing a spinning top you can assume the market is unable to reach a decision in between buying and selling forces.Sentiment is a good area of study.Thank you Jamie for starting this thread.Muraleedharan forexcentral@gmail.com

Hi Jamie,

As I said before, very well done. If we understand group behaviour and other basic elements of the human mind, we can be more successfull as traders.
Now, lets apply this theory in the current day situation. I see the market as a group of people who are trendsetters, and trend followers. Trendsetters are the people who have it right and other people follow their trend. For instance, Real Estate did really well, because money was cheap, home values increased rapidly and there was a very good chance you would make a quick low risk profit. Ofcourse we all know what happened. But the housing market rally started because people with dot com stocks were looking for greener pastures once that market collapsed. From real estate they went into the Euro and Oil, and now it looks like they are jumping ship there and going into the dollar, until that collapses (soon?).

Is this how you see it as well? People following a trend, looking for a place to put their money and make a profit following the hype?
So, with oil and gold down, recession hammering at our door, where should the average investor put his money?

congratulations