Experiment - Trading Market Sentiment

Thanks fosking,

Still not jumped back in. Waiting for OandA open positions ratio to confirm and a decent point to jump in at... I'll post as soon as I re-enter.

You may be willing to try trading delta of this ratio instead of the ratio itself. The ratio will take way too long to move to significant values.

What do you think of GBP/JPY stats on MyFXBook ?

Interesting thread.

I will watch it. good luck!

One comment I will make though is if this thread becomes to popular it may actually effect the numbers lol

Well I really want to enter short because that's the way the EUR/USD pair seems to be heading at the moment; and I didn't really want to get out of my short position when I did either. But the system says I had to. Sentiment still isn't clear so I'm still out of the market.

That's the great thing about posting updates on a forum though. It helps you stick to the plan. If I weren't posting here I might very well have held on to my short and gone against the system - that would have made me more money this one time, but at the expense of not learning what I'd set out to learn about the effectiveness of trading market sentiment.

Hopefully we'll get a trade on soon to analyse. Thanks to all for all the constructive feedback so far.

Well, it's less likely to be representative of the market as there are a lot less people trading that pair. You really do need a very large sample size or else the sentiment amongst a certain brokers retail clients may not represent general retail sentiment at all.

Also, I'd compare how other GBP pairs are sentiment wise and how other JPY pairs are sentiment wise. What they general sentiment on the Yen, what's the general sentiment on the Great British Pound?

I'm not sure. As long as they loose, you don't care how many they are.


Here is the point. Grabbing the right stats. I never found those up to now.


Did you do that for EURUSD ? Do you think retail loosing traders do have a GBP sentiment and a JPY sentiment so they trade it on GU/GC/GJ and EJ/CJ/GJ ? I have some doubt ...

FXCM Retail Accounts - Wednesday 17 November 2010 10:30 GMT

EURUSD - The ratio of long to short positions in the EURUSD stands at 1.10 as nearly 52% of traders are long. Yesterday, the ratio was at 1.24 as 55% of open positions were long. In detail, long positions are 2.1% lower than yesterday and 13.9% stronger since last week. Short positions are 10.4% higher than yesterday and 6.0% stronger since last week. Open interest is 3.5% stronger than yesterday and 123.1% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.82 as nearly 65% of traders are long. Yesterday, the ratio was at 2.34 as 70% of open positions were long. In detail, long positions are 6.2% lower than yesterday and 41.2% stronger since last week. Short positions are 20.8% higher than yesterday and 14.4% weaker since last week. Open interest is 1.8% stronger than yesterday and 118.7% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

GBPJPY - The ratio of long to short positions in the GBPJPY stands at -2.63 as nearly 72% of traders are short. Yesterday, the ratio was at -2.38 as 70% of open positions were short. In detail, long positions are 0.7% higher than yesterday and 20.6% stronger since last week. Short positions are 11.1% higher than yesterday and 42.2% weaker since last week. Open interest is 8.0% stronger than yesterday and 104.4% above its monthly average. The SSI is a contrarian indicator and signals more GBPJPY gains.

USDJPY - The ratio of long to short positions in the USDJPY stands at 2.97 as nearly 75% of traders are long. Yesterday, the ratio was at 3.10 as 76% of open positions were long. In detail, long positions are 0.0% higher than yesterday and 9.0% weaker since last week. Short positions are 4.4% higher than yesterday and 9.3% stronger since last week. Open interest is 1.1% stronger than yesterday and 84.8% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

USDCHF - The ratio of long to short positions in the USDCHF stands at 1.41 as nearly 58% of traders are long. Yesterday, the ratio was at 1.26 as 56% of open positions were long. In detail, long positions are 2.4% higher than yesterday and 29.3% weaker since last week. Short positions are 8.3% lower than yesterday and 32.4% stronger since last week. Open interest is 2.3% weaker than yesterday and 75.2% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

USDCAD - The ratio of long to short positions in the USDCAD stands at 2.36 as nearly 70% of traders are long. Yesterday, the ratio was at 2.17 as 68% of open positions were long. In detail, long positions are 2.2% lower than yesterday and 42.5% weaker since last week. Short positions are 10.4% lower than yesterday and 46.8% stronger since last week. Open interest is 4.8% weaker than yesterday and 66.4% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

AUDUSD - The ratio of long to short positions in the AUDUSD stands at -1.28 as nearly 56% of traders are short. Yesterday, the ratio was at -1.21 as 55% of open positions were short. In detail, long positions are 0.8% higher than yesterday and 14.4% stronger since last week. Short positions are 6.7% higher than yesterday and 13.1% weaker since last week. Open interest is 4.0% stronger than yesterday and 94.6% above its monthly average. The SSI is a contrarian indicator and signals more AUDUSD gains.

NZDUSD - The ratio of long to short positions in the NZDUSD stands at -1.50 as nearly 60% of traders are short. Yesterday, the ratio was at -1.22 as 55% of open positions were short. In detail, long positions are 12.2% lower than yesterday and 8.6% weaker since last week. Short positions are 8.2% higher than yesterday and 16.2% weaker since last week. Open interest is 1.0% weaker than yesterday and 53.0% above its monthly average. The SSI is a contrarian indicator and signals more NZDUSD gains.

Well OandA's open position ratio changed earlier today saying that most retail traders were now net short, at the moment it's 52.31% of traders are short. If this is confirmed by DailyFX's SSI ratio later today I'll go long even though I think it's going to continue falling.

OK, I'm a bit later for today's update but that's a trade on right now -

Long EUR/USD @ 1.3530

My intuition is telling me to go short, but OandA (the primary indicator in this experiment) is saying that right now 54.73% of retail traders are short, they're the majority so for the purposes of this thread I go against them and see what happens.

DailyFX + hasn't confirmed the signal, at 6pm GMT they had 51% of traders long. Perhaps I would be better sticking to using DailyFX + as a contrarian indicator because according to OandA 48% of it's accounts are profitable but only 23% of FXCM's accounts are. http://www.oanda.com/ Maybe I should just fade FXCM. But I have to stick to the original purpose of the thread.

Well that market is at around 1.3650 now so that's my trade about 120 points in profir now, but that could easily change in the next 5 minutes LOL!

It just feels so 'wrong' that the EUR/USD should be rising but nevertheless it is.

OandA's open position ratio has fallen now and only 50.53% of it's traders are now short but DailyFX's excellent indicator has almost 53% of it's traders short as of this morning, next reading due at 6pm GMT. If OandA goes below 50/50 I'm out. If DailyFX goes against me and OandA isn't about 52/48 I'm out. I'm actually hoping the system lets me out of this trade in the next few hours because it feels wrong that the market is rising and I'd like to keep some of those profits.

I'm looking at the market now, it's dived about 30 pips in a few minutes and the long short ratio has short up to 52.37% of traders short... Lets see what happens... Anyone wanna guess...

PS. Gotta stop looking at the market, sitting there staring at the screen watching the random ticks is one of the most psychologically destructive things a trader can do. Or at least it is for me anyway, seriously don't recommended it. Checking it a couple of times a day is usually enough.

The market is now at 1.3650 120 pips or so above where I entered long. But I've just made a mistake and bailed out of the trade

This has happened because I didn't take my own advice and sat and watched the market. That's when mistakes happen

Looking to go short now as soon as the ratio turns again.

OK time for another trade as the sentiment is clear, both DailyFX+ and OandA have around 53% of traders short the EUR/USD.

Long EUR/USD @ 1.3555

This is really testing my faith in the contrarian approach because I believe the Euro should be falling like a stone right now; perhaps this is one of the few times retail FX is actually right?

Stop at 1.3420 as I really think this trade could turn bad

OK, moved the stop down another 100 pips so the trade's got some room to breath... Hopefully I'll learn something from all of this.

Right. most retail traders are now long so I've closed for a 150 pip loss

Next trade: Short @ 1.3404

Well, the latest trade is in profit now about around 60 or 70 pips, it's just a shame (for me) that the open positions ratio hadn't turned a few hours sooner. Still, I guess you could say the exact same thing about moving averages...

Small retail traders typically trade in the exact opposite way as the large speculators and hedge funds. They gamble, trying to pick short-term tops and bottoms. Picking tops and bottoms consistently is damn near impossible so the majority of retail traders are usually losing money as they fight the trend. When the market does finally turn the majority of retail traders will be on the winning side, when this happens they typically take a small profit and close their positions then end up wrong and losing money, again. In the financial markets (especially the Forex market) money tends to flow from the majority of small traders into the pockets of the few large ones. - My Blog

Retail traders were right to be short, but as the market tanked they removed their positions and went net long.

Any thoughts as to why, I've given mine above.

OK, that's the ratio turned again. OandA say 50.76% of retail traders are shortthat's a majority so I'm closing my short position @ 1.3217.

A win of 187 pips

I'm looking to take another short EUR/USD position as OandA's ratio suggest retail traders are now net long, I'll post when I take the trade...

Hey Davidee.....

I'm sure your familiar with this site but here is a link just in case........ Timing Charts .....

It is a longer term thing since it is COT related but you may find it of some use.