Every 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.”
Meet Mr. Bear and Mr. Bull
Each and every trader will have their own personal explanation as to why the market is moving a certain way. When trading, traders express this view in whatever trade he takes. But sometimes, no matter how convinced a trader is that the markets will move in a particular direction, and no matter how pretty all the trend lines line up, the trader may still end up losing. A trader must realize that the overall market is a combination of all the views, ideas and opinions of all the participants in the market. That’s right… EVERYONE.
This combined feeling that market participants have is what we call market sentiment. It is the dominating emotion or idea that the majority of the market feels best explains the current direction of the market.
As a trader, it is your job to gauge what the market is feeling. Are the indicators pointing towards bullish conditions? Are traders bearish on the economy? We can’t tell the market what we think it should do. But what we can do is react in response to what is happening in the markets.
Note that using the market sentiment approach doesn’t give a precise entry and exit for each trade. But don’t despair! Having a sentiment-based approach can help you decide whether you should go with the flow or not. Of course, you can always combine market sentiment analysis with technical and fundamental analysis to come up with better trade ideas.
“It’s a bear market, everything is going to hell!”
“Things are looking bright. I’m pretty bullish on the markets right now.”
Meet Mr. Bear and Mr. Bull
Each and every trader will have their own personal explanation as to why the market is moving a certain way. When trading, traders express this view in whatever trade he takes. But sometimes, no matter how convinced a trader is that the markets will move in a particular direction, and no matter how pretty all the trend lines line up, the trader may still end up losing. A trader must realize that the overall market is a combination of all the views, ideas and opinions of all the participants in the market. That’s right… EVERYONE.
This combined feeling that market participants have is what we call market sentiment. It is the dominating emotion or idea that the majority of the market feels best explains the current direction of the market.
As a trader, it is your job to gauge what the market is feeling. Are the indicators pointing towards bullish conditions? Are traders bearish on the economy? We can’t tell the market what we think it should do. But what we can do is react in response to what is happening in the markets.
Note that using the market sentiment approach doesn’t give a precise entry and exit for each trade. But don’t despair! Having a sentiment-based approach can help you decide whether you should go with the flow or not. Of course, you can always combine market sentiment analysis with technical and fundamental analysis to come up with better trade ideas.
Editors’ Picks
EUR/USD recedes to daily lows near 1.1770
EUR/USD is losing some momentun, easing to daily troughs around 1.1770 on turnaround Tuesday. The pair’s pullback comes amid solid gains in the US Dollar, all amid lingering uncertainty around US tariffs ahead of comments from Fed officials.
GBP/USD comes under pressure below 1.3500, focus on BoE
GBP/USD is on the defensive again on Tuesday, hovering below the 1.3500 mark as the Greenback stages a firm rebound after two soft sessions. Investors, in the meantime, are expected to closely follow BoE official’s comments later in the day.
USD/JPY climbs to 156.00 area as markets doubt BoJ rate hikes
USD/JPY catches a fresh bid wave and challenges the 156.00 region on Tuesday. The pair rallies as the Japanese Yen (JPY) falls hard on reports that Japan's PM Takaichi voiced concerns to BoJ Governor Ueda on interest rate hikes.
Editors’ Picks
EUR/USD recedes to daily lows near 1.1770
EUR/USD is losing some momentun, easing to daily troughs around 1.1770 on turnaround Tuesday. The pair’s pullback comes amid solid gains in the US Dollar, all amid lingering uncertainty around US tariffs ahead of comments from Fed officials.
USD/JPY climbs to 156.00 area as markets doubt BoJ rate hikes
USD/JPY catches a fresh bid wave and challenges the 156.00 region on Tuesday. The pair rallies as the Japanese Yen (JPY) falls hard on reports that Japan's PM Takaichi voiced concerns to BoJ Governor Ueda on interest rate hikes.
Gold fades the advance, back to $5,100
Gold is giving back a good portion of the recent multi-day rally, receding to the boundaries of the $5,100 region per troy ounce amid the marked rebound in the Greenback. In the meantime, markets’ attention remain on upcoming comments from Fed speakers.
Crypto Today: Bitcoin, Ethereum, XRP come under renewed pressure amid ETF outflows, tariff uncertainty
Bitcoin, Ethereum and Ripple are trading under increasing selling pressure at the time of writing on Tuesday, as market participants navigate renewed tariff uncertainty. The Crypto King holds above $63,000, down 2% intraday from its $64,656 open.
The Citrini report: How a debatable AI narrative can shake Wall Street Premium
That AI-related headline alone was enough to rattle investors.US stocks slid sharply on Monday after a widely circulated Citrini Research memo outlined a hypothetical “2028 Global Intelligence Crisis”, warning that rapid AI adoption could push US unemployment into double digits as early as by mid-2028.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.