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What is market sentiment & how to use it?

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Traders are often searching for new indicators that help them to understand the market better and allow them to enhance their trading strategies. While the indicators that could be plotted over the chart remain the most popular, there are actually other tools that can benefit your trading strategy quite a lot. Today we are going to uncover one of such tools – market sentiment.

What is market sentiment?

The good news are that this indicator does not have any mathematical formulas behind it, hence understanding it is pretty easy. Also known as Bulls and Bears, market sentiment is a tool that is used to measure the psychology and the attitudes of the trading crowd.
Imagine EUR/USD is currently traded at 1.1500. As a matter of fact, there should be traders with long positions. However, there are also should be trading going short on this currency pair. The main question is, whether does the majority of the traders predict the market to go? And this is easily answered by the market sentiment. The indicator is usually shown as a pie chart that is split into two parts – traders that are short and traders that are long on a given instrument.

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Trading models based on channels: Wolfe Waves

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Price channels are a clear example of resources that can be used to define both entry points and exit points. In addition they allow to analyze the current situation in the market in such a way that they allow the trader to make better decisions. Once the channel is formed, we can obtain a lot of information related to the price movement inside the same channel, however the problem occurs when the market does not move in a defined channel, a situation in which it can be difficult to detect breakout points and therefore the reaction of the market can take us by surprise.

For these cases the investor can use the so-called “advanced channel models“, among which we can highlight the Wolfe Waves, which can help us to identify potential entry and exit points of the market based on channels, even when in appearance there is no clearly defined channel.

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The Camarilla Equation – Formula and Definition

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The Camarilla Equation is an interesting market analysis tool similar to the pivot points but is little known among the majority of traders. For this reason, in the following article, we will explain in detail about the fundamentals and use of this tool.

Camarilla equation was discovered by the trader Nick Stott in 1999, and until recently it was a secret formula to determine price levels similar to the pivot points, but according to many traders, these levels are more effective. It assumes that the market has the tendency to revert to a point of balance that might be called midpoint, pivot, and so on. Based on this idea and using the formula of the equation is possible to calculate 8 relevant price levels in which is likely to produce changes in the market trend.

As mentioned at the beginning of the preceding paragraph, the Camarilla equation was secret until it was somehow released. The equations for calculating the 8 levels are:

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Stages that characterize a bullish or bearish market

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The phases that characterize the bull and bear markets are as follows:

– Bull Market

This type of market is produced when the advance of prices reaches a level higher than the previous advance. Likewise, when no secondary trends become established below the latest peak. We can identify three phases in a bull market:
  • Accumulation phase: At this stage falls occur in the market as the investors sell because the economic news are mostly negative. There is a moderate activity that begins timidly to recover.
  • Recovery or expansion phase: In this case the activity begins with a modest progress and it produce a shy rising in market prices.
  • Distribution phase: There is great activity in the market. There are major upward movements in market prices and trading volume and investors take long positions without objection.

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Are Expert Advisors profitable at the long term?

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Forex Robots or EA

Probably the most common questions among traders that are getting started with the Expert Advisors are the following:

  1. Are trading robots profitable at long term?
  2. Can we make a living with this?
Both questions, obviously have the same answer and the answer is a resounding yes. But a resounding yes with many shades.
Forex robots work better or worse depending on what we can call an appropriate market. In this case, we can define an “appropriate market” by a number of factors:

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Four Myths About Forex Trading

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The main myths related with Forex trading 1) “If you know how to trade in the stock market, you know how to make money in Forex” If you have experience trading with shares and you believe that you can simply apply that knowledge to make Forex Trading, then you will be very disappointed. The truth is that the Forex market … Read more

Why So Many Traders Fail?

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The trader and the market

The reality is that the numbers do not lie, almost 90% of those who are starting for the first time in the financial markets like Forex just fail and lose their hard earned money. In fact, there are only a few traders who makes huge profits and live comfortably with this activity. The question that comes to mind then, is why many people fail when begin to trade in the market?
 
In my opinion it is not a matter of intelligence, since even highly intelligent and prepared people is swept by the market very easily. In fact it is not uncommon to see doctors, lawyers, economists, engineers and similar losing large amounts of money constantly, money that they can not afford to let go as if nothing. It is also possible to find people whose skills and academic preparation is not the best, but they have being successful  market speculators and therefore earns tons of money.

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Forex Articles

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In these section we are going to include general articles about Forex and the financial markets. These articles will have a variety of topics, from trading systems, system evaluation, trading psychology, market analysis, Forex brokers, Forex autotrading, Forex signals and more. In this way, the trader may complement their training with interesting articles that will give you a more complete picture of trading.

These articles will be written by traders with experience in the financial markets, mainly in Forex. If you have any questions or suggestions about an article that you would like to read, please let us know.

Likewise if you wish to contribute with some articles written by you, you will be welcome. If you want we can include the name of the author and the link you want.

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Free bonus of $123 USD from FBS broker

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The Forex and CFD broker FBS offers for 2016 a promotion without a time limit for new and existing customers, consisting of a $123 bonus for traders who open an account with this company. This bonus is awarded for a limited time (seven days), and the profits obtained through the transactions in which the bonus money is used can be retained without restriction. However, the bonus money itself can not be withdrawn.

-Period of validity of the promotion: For now this offer has no deadline and is valid throughout 2016, however FBS may change the terms or cancel the promotion at any time.

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