IG Client Sentiment shows where traders are positioned in the markets. Learn how to use IG CS to spot opportunities based on trader positioning and sentiment.
Trading on sentiment data can help traders identify hidden trends in the market that may not be obvious to novice traders.DailyFX provides client sentiment data based on all live IG trades in the forex, commodity, cryptocurrency, and indices markets and acts as a contrarian signal. A successful sentiment trading strategy would look to make a trade in thedirection whenever sentiment shows a strong directional bias.
Using client sentiment as the starting point, however, can be extremely useful as it can inform which market to trade and in what direction before any other analysis is even done. Thereafter, traders can use technical analysis to spot ideal entry and exit points for that market.: Look for markets exhibiting extremes in positioning. Strong upward trending markets combined with extreme net-short client positioning, result in a bullish signal.
To their detriment, retail traders tend to focus more on catching reversals in strong trending markets than trading ranges. Therefore, when trading on sentiment, traders will find more reliable signals in strong trending markets.To make the analysis easier, DailyFX provides a comprehensive report on major markets, showing IG sentiment overlaid on price. To get the full report, navigate to theThe report produces a price chart for each market with sentiment superimposed on the same chart.
In the above diagram, price is in a strong downtrend and sentiment is showing over three times more long traders for every short trader, therefore, this can be regarded as a bearish signal.
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