Why is it important?
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.
-FXCM analyst Jaime Saettele
Retail positioning can be used with news trading, scalping, elliot waves, and swing trading.
You can see in the image below how retail positions increased as price decreased. This is a common occurrence in trending markets as retail traders try to pick bottoms and larger funds pick their stops.
How to trade positioning information:
The strategy below was published in 'Sentiment In The FOREX Market' by Jamie Saettele.
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.
-FXCM analyst Jaime Saettele
Retail positioning can be used with news trading, scalping, elliot waves, and swing trading.
You can see in the image below how retail positions increased as price decreased. This is a common occurrence in trending markets as retail traders try to pick bottoms and larger funds pick their stops.
How to trade positioning information:
The strategy below was published in 'Sentiment In The FOREX Market' by Jamie Saettele.
- Retail Sentiment is a contrarian indicator during trending markets.
- The flipping of the ratio is a more accurate signal of a turn in price than extreme positioning.
- The Retail Sentiment confirms the price action during range bound markets.
- Retail Sentiment moves inversely to price.
- Follow the slope of the Retail Sentiment ; a change in the slope means a change in trend.
- The other way of looking at speculative positioning is to look at the percentage of open orders that are long.
- Net positioning=long orders+short orders.
- More than 50% favors weakness.
- Less than 50% favors strength.
- Higher net positioning means that more traders are entering the market.
- Higher net positioning suggests more confidence in the direction of the current trend.
- Many times a significant increase in net positioning precedes a bull market because many of the traders who entered the market are leaving their stop losses just above the current price action.
- Lower net positioning means that more discouraged traders are leaving the market.
- Rising prices and a big fall in net positioning is bearish because short covering is fueling the current trend. When the short covering has ended, prices will likely decline.
- Lower net positioning suggests profit taking and hence consolidation.
- Lower net positioning suggests higher risk aversion.