So what happened with UJ? As enticing as it would have been to short (which we were hoping for) - we didn't take the trade because there were 2 winds opposite the trade. Blog post coming soon to go over it in detail.
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SentiFX, I was also following UJ closely and also wanted to short it but then Sentiment was still pointing to a buy and well above 75% Short Retail positioning and also saw an upward break of MS on H1...Seems as if there were too many stops sitting around the 109.100 area
I was waiting for a slight reversal back to the structure after noticing this but then price rallied straight to the 109.100 area without any significant pauses along the way.
{quote} SentiFX, I was also following UJ closely and also wanted to short it but then Sentiment was still pointing to a buy and well above 75% Short Retail positioning and also saw an upward break of MS on H1...Seems as if there were too many stops sitting around the 109.100 area I was waiting for a slight reversal back to the structure after noticing this but then price rallied straight to the 109.100 area without any significant pauses along the way. Still watching it though!!!
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Same here Gceezee, somehow I let myself get tunnel vision even though I "KNEW" that UP was the proper direction. I waited for the trade that never presented itself when the easy trade was right in front of my face.
{quote} Same here Gceezee, somehow I let myself get tunnel vision even though I "KNEW" that UP was the proper direction. I waited for the trade that never presented itself when the easy trade was right in front of my face. Read about it here: https://sentifx.com/share/ff/post/bl...easonal-trade/
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Very informative SentiFX,
I believe almost the same thing was happening to EU as well...We had an MS break to the downside and a minor pullback into structure and I guess the MS was leading in this case as sentiment was still shifting, Retail loading buys at faster rate I guess..I missed this one as well...
Can you explain a bit your money/risk management plan? I understood that you close your trades if you see something you don't like. Like sentiment shifting and significant break of stop cluster. How do you calculate your initial risk if you don't know this upfront or don't know how many orders will be filled?
Hi Sentifx, Can you explain a bit your money/risk management plan? I understood that you close your trades if you see something you don't like. Like sentiment shifting and significant break of stop cluster. How do you calculate your initial risk if you don't know this upfront or don't know how many orders will be filled? Thanks
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Risk management plan is simple - I base it on account size * how much I want to leverage (based on confidence in a trade i.e. multiple stars aligning).
If 2 or more stars are aligning - I put on 5:1 to 10:1 risk. If only 1 star then I would do 2:1 or 3:1.
By stars aligning, I mean Orderflow is in the same direction as our Sentiment Bias (that would be 2 stars aligned). If Seasonality was also aligned with the trade that would be 3 stars. If currency strength was also aligned that would be 4 stars.
The more stars, the higher I leverage * account size.
So let's assume you have a $5,000 USD account. If you have 2 stars align (Sentiment Positioning/Change/Shift in line with Order Flow), it would be wise to scale in to positions at max 50,000 units (but 25,000 units is more reasonable for 2 stars). So you could work an area with 5 orders of 5,000 units each. Total scale in at 25,000 for instance.
Where to place stops? It really depends on the trade - where you know you'd be wrong. A good default is 2 swings away to guard against a GG and also allow for graceful exits instead of full stop outs.
Since you've triggered my interest in sentiment I found few dozens places to get it all over the net. I believe this number will be only growing to generate more confusion.
While I understand what the sentiment is and why it works, what surprises me is the opposite reading by different herds. How can, say, the FF crowd interpret some chart situation mostly bullish while Oanda's or myFXbook crowds interpret the same exactly situation mostly bearish? It is an often happening discrepancy per my observations. I have no reason to believe that any of the 3 would lie, but at the same time a totally opposite reaction of 3 herds is perplexing. In theory they should react the same or very close.
You've obviously done a lot of research on the subject. What is your take on it?
It's not about which herd is right or wrong, it's more about where the most liquidity is to transact and profit from.
I talk a lot more about this with the market structure deep dive when we look at how the orderbook works and what really moves the market.
What is known by brokers, mt4 developers, banks etc is where the most liquidity is at any given time.
Retail trading $100,000 units with a 1k account is a liquidity provider. Multiply that by thousands and thousands of retail traders and you get the picture.
So if the greatest liquidity to get out of a position is above and you knew that, it would make sense to buy (and continue buying) to push price where you could get out easily for profit.
Unfortunately, we dont have that advantage in fx.
But we can aggregate retail positioning. We know retail loses over the long term.... which means their stops are taken... typically after max pain of adding to losers.
We know when the sheep are heavily over loaded ... we know when they are shifting sides.... and we have a great idea where their stops are.
When the market tips its' hand towards that liquidity - we strike and aim to take it thr same way market manipulators do.
Just last week... one trader in our community mentioned that he likes when retail shifts positions and then waits for a market structure change to take a trade.
Sentiment shifting and overloading is a great directional leading indicator and he uses it to take profitable trades.
We dont need all the sheep to be in alignment. We just want to know what the majority are doing and how we will capitalize on that when that majority are over loaded or shifting sides.
He has run Sentiment Trading thru the ringer from a Scientific and Quant Perspective.
The results are incredible.
Although to those who have learned and are trading the SentiFX Methodology - it's not surprising....
See attached Sentiment Cycle that we have been aware of, have been trading week after week, and have shared in our courses.
But there were some discoveries that help fine tune the methodology and open up a huge edge for longer term traders.
We want to go against retail until they reach the extremes and only trade against retail for up to 3 days after the extremes are reached.
Then we want to go WITH Retail's original direction as retail were stopped out - exited their positions for whatever reason - and shifted sides. Again see the Sentiment Cycle attached.
Thanks to Bob, we now have quantitative evidence that trading against retail is profitable - but most importantly that these shifts in retail positioning are EXTREMELY PROFITABLE - especially for traders who can hold for a week and a half!!
Anyway - be on the lookout for the series of quantitative research that Bob is going to blog about.
For those Technically inclined, here is the beginning of proof using Quantitative Analysis that Sentiment Trading has Edge that you can Exploit for Profit.
This doesn't take into account anything other than price movement in relation to sentiment.
1. Trade in the Direction of Sentiment Shift or Extreme (but as noted previously, if it's been extreme for more than a few days - DO NOT)
2. Ideal Entry is at the 0.5-0.6% Retracement as you are better than a 1:1 R/R at this point and follow thru momentum plays are likely to continue at or above this zone. Entry at the 0.2 is really bad R:R, 0.3 is to 0.7 is the area I'm most interested in.
3. Placing your Stops in line with Retail Stops is FINE if it is a Line in the Sand Stop. i.e. an Are where Market Structure would be considered changed. Otherwise - focus on exiting faster. If price goes to 0.8 or more, it's not likely to take out stops above anymore. The momentum is not there. Exiting at 0.8 gets you out before MMs target lower for Retail Liquidity.
4. Target Retail Stops for Profit up to the 0.3% EXTENSION, i.e. 30% more of the original swing. This is a very common exhaustion area. Expecting much more than this for short term trading is disillusioned.
5. The Likely Reversal Zone is the absolute furthest I would consider a target for any short term play. Price is HIGHLY LIKELY to mean revert in this zone. This zone is excellent for Anti Momentum Trading - Trading Against the Herd - or if the Herd has been Over Extended for a few days - this is a good time to go with the Herds original position. When going against flow in this zone, the Possible but Not Probably Zone is a great area for your stops. If price hits it - pressure is strong and mean reverting in the short term is going to get you run over. Find a way to go with the flow at this point.
