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December 10th, 2018 @ 5:32 pm by Muhammad Azeem

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Forex Sentiment Analysis

When trading within the forex market, there are three key methods of analysis which can be used to identify possible trends and ultimately decide our positions within the market. These are, fundamental analysis, technical analysis, and sentiment analysis. Of these methods, the most nuanced and challenging to interpret is sentiment analysis. In the fast-paced world of online trading, it is of key importance to understand both the key sentiment indicators and how to react to them appropriately when trading forex.

What is Sentiment Analysis in the Forex Market?

For good reason, sentiment analysis has been employed by almost all of the most successful forex traders to a high degree. It is notoriously difficult to measure, but at its core, sentiment analysis is the study of how the forex market feels at a particular time. Essentially, when we engage in forex market trading, we are expressing our feeling related to how a particular currency pair might perform. Zooming out from our singular decision allows us to see that every combined action within the market forms a general “feeling”. This is the market sentiment.

Through analysis of this sentiment and how it may be impacted by certain trading factors, we can establish how the market will react and thus position our trades accordingly. Being aware of how the market feels, ultimately allows traders to effectively leverage the market sentiment, trading in the direction which they feel the market will take based on a few of the key indicators.

Sentiment analysis also gives rise to another class of trader. That is the contrarian trader. This is someone, whether forex trading online or otherwise, likes to trade against the prevailing market sentiment. Eduardo Elsztain and George Soros are both prime examples of famous traders who profited largely from going against market sentiment.

Key Sentiment Indicators and How to Interpret Them

Sentiment indicators play a vital role in helping traders gauge the current sentiment of the market. These are something which many new traders should be made aware of early on through any reputable forex trading tutorial. Tradefw.com is a positive example of a forex trading broker who offers such an in-depth educational program.

Commitment of Traders Reports

The Commitment of Traders (COT) report is one of the most valuable ways in which you can get an accurate feel for the forex market sentiment, quantified through the featured data. The report is published by the Commodity Futures Trading Commission each Friday and shows the open positions as of the preceding Tuesday.

The data featured in a COT, although not in real time, is the most accurate to represent the market status. In interpretation of this data, traders should be checking for extreme positions within the market. The following formula can be used to extract that percentage from the data:

Commitment of Traders Reports

Volatility Index (VIX)

A second quite effective method for gauging sentiment within the forex market is by viewing the Volatility Index published by the Chicago Board Options Exchange. Generally speaking, since market sentiment is largely based on the emotion and feeling of the market as a whole, the more volatile a currency is rated by the CBOE, the more fear is existing. This would typically create negative forex sentiment trading around that currency.

Market Volume Indicators

Volume indicators as a link to forex market sentiment are especially important. This includes the likes of the Money Flow Index (MFI), and the On-Balance Volume (OBV). The MFI is used to chart the money flow into the market over several days, with an obviously increased flow being linked to market confidence and correlating positive sentiment.

The OBV is also used to chart buying and selling pressure within the market, a key measurement when it comes to correctly identifying the market sentiment.

Independent Broker Tools

Due to the decentralized nature of the forex industry, it can be quite difficult to get precise data on exact positions and volumes within the industry, as they do not all pass through one centralized point. For that reason, many forex brokers will offer their own tools to assist with your sentiment analysis. These can and should then be cross-checked through other forex trading platforms.

The Importance of Sentiment Analysis

Within forex trading and any market, technical, fundamental, and sentiment analysis are all important aspects. Separately, these can identify certain patterns which can help direct your trading in a positive manner, or steer it away from dangerous situations in certain instances. When combined however, these can form a detailed analytical picture of the forex market which will vastly help in improving your skills as a forex trader.

Trading forex without conducting sentiment analysis decreases the amount of knowledge a trader has at their disposal. Ultimately, this results in a higher level of risk when trading in any market.

Conclusion

Although difficult to pinpoint with extreme accuracy due to its inherently emotional nature, sentiment analysis will form a key part of your forex trading strategy alongside the other forms of analysis. The value in this analysis is clear to see and should not be discounted. Having been used by some of the most prolific traders in the forex market over time, its effectiveness has been all but proven.

For this reason, it is imperative to choose a reliable forex broker who will guide you on the journey to understanding sentiment analysis in detail and provide support in other areas of your forex trading progression.

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March 28th, 2017 @ 9:25 pm by Muhammad Azeem

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3-29-2017 2-16-14 AMTrend is bullish in NZD/USD currency pair, four hour time frame. As I have suggested past week during my daily Live trading room session, market is falling down to complete a bearish Elliott wave y leg and traders should look for a sell trade. So, all those Forex traders who have followed my Elliott wave analysis have made the right decision as the price action has descended. Strong key support level is present at 0.6892 price level.

 

Be sure to check out daily Forex market updates via Live Trading Room. In my opinion, price action in NZD/USD currency pair is most probably going to drop more towards 0.6945 price area to print a bearish wave y leg which is going to complete Double Zig Zag Wave 2 leg. So, a good idea is to go long at or around 0.6945 market level to ride and trade the upcoming bullish Impulse wave 3 Elliott wave pattern.

 

However; if price action of NZD/USD currency pair closes a bearish candlestick below 0.6892, key support level then bullish Elliott wave count will become in-valid. In this case, I would prefer to stop trading the NZD/USD currency pair and re-look at the four hour chart.

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March 14th, 2017 @ 10:47 am by Muhammad Azeem

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3-14-2017 3-21-29 PMTrend is bearish in AUD/USD currency pair, four hour time frame. As I have suggested past week during my daily Live trading room session, market is falling down on a medium term basis to complete a bearish Elliott wave c leg and traders should look for a sell trade. So, all those Forex traders who have followed my Elliott wave analysis have made the right decision as the price action has descended. Strong key resistance level is present at 0.7632 price level.

 

Be sure to check out daily Forex market updates via Live Trading Room. In my opinion, price action in AUD/USD currency pair is most probably going to drop more towards 0.7485 price area to print a bearish wave c leg which is going to complete wave Y of a Double Zig Zag. So, a good idea is to go short at market to ride and trade the bearish wave Y Double Zig Zag Elliott wave pattern.

 

However; if price action of AUD/USD currency pair closes a bullish candlestick above 0.7632 important resistance level then bearish Elliott wave count will become in-valid. In this case, I would prefer to stop trading the AUD/USD currency pair and re-look at the four hour chart.

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March 7th, 2017 @ 10:03 pm by Muhammad Azeem

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3-8-2017 3-00-39 AMTrend is bearish in four hours chart. Important resistance level is present at 0.7245 price level. In past few trading days, market has moved lower. A clear bearish Expanded Flat Elliott Wave pattern has appeared at Wave iv location which pushed the price down.

A good option is to look for a sell trade as price is already falling down to print a Bearish Impulse Wave v leg. If bullish candlestick closes above 0.7245 key resistance level then down trend is going to fail. In such case, I would prefer to stay out of market and re-analyze the price action in NZD/USD currency pair.

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March 3rd, 2017 @ 6:48 pm by Muhammad Azeem

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3-3-2017 11-42-34 PMTrend is bullish in four hours chart. Critical support is present at 118.22 price level. The price of EUR/JPY currency pair moved up to print bullish Wave iii leg. Now, I expect a top in price action and market to going to fall down to print a short term bearish pull back – Wave iv. Wave iv which is most likely going to be a sideways corrective pattern.

A good suggestion is to wait for the Wave iv to first appear and then look for a buy trade to join an up trend. However; if market closes a bearish candlestick below 118.22 vital support area then bullish trend will end. In such case, I will stop myself from trading and re-analyze the price chart of EUR/JPY currency pair.

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March 2nd, 2017 @ 9:45 pm by Muhammad Azeem

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3-3-2017 2-42-13 AMTrend is bullish in four hours chart. Important support is present at 0.8492 price level. Price is most likely going to create a short term bearish pull back to print Wave iv. Wave iv is going to be a Flat of Triangle Elliott Wave pattern.

A trading idea is to wait for more bars to get a clear pattern and then go long at the termination point of Wave iv. If price breaks below 0.8492 vital support level then up trend is going to end. In such a market scenario, it would be best not to trade the market and re-analyze the EUR/GBP 4 hours time frame.

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February 21st, 2017 @ 8:07 am by Muhammad Azeem

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eur-usdTrend is bearish in EUR/USD currency pair, four hour time frame. As I have suggested past week during my daily Live trading room session, market is falling down on a short term basis to complete wave b of a Zig Zag Elliott Wave pattern and traders should look for a sell trade. So, all those Forex traders who have followed the analysis have made the right decision as the price has descended. Strong key resistance level is present at 1.0828 price level.

Be sure to check out daily Forex market updates via Live Trading Room. In my opinion, price action in EUR/USD is most probably going to rise up again to print a possible bullish wave c pattern to complete a Zig Zag which is going to complete corrective Wave B. So, a good idea is to first wait for a bullish wave c leg in price action and then short the market to ride the bearish wave C leg!

However; if price action of EUR/USD currency pair closes a bullish candlestick above 1.0828 key resistance level then bearish Elliott Wave count will become in-valid. Henceforth, I may jump at the chance to stay out of the market and re-analyze the EUR/USD price action.

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October 14th, 2011 @ 5:54 pm by Michael Radkay

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BY <a href=”http://www.rdstrader.com”>STEPHANIE RADKAY</a>

<div style=”float: right;”><img src=”http://www.rdstrader.com/castle.jpg”></div>Long ago in the ancient land of Tradeopolis there lived a king, King Libra.  This king was a very kind, intelligent, giving, sharing soul.  The thing that was most unique about King Libra compared to any other king was he was more like a God.  His people and the surrounding kingdoms often prayed to him and bowed to him in his presence for he had such great intelligence and knew everything there was to know.  The people in Tradeopolis respected him greatly and when anyone was in need they would go to him to help solve all their problems.

One day one of his people, Fast Market Freddy, came to King Libra and told him he wanted to trade Foreign Currency.  “Ah, yes,” said the King,  “what a brilliant idea.  You know you must have money in your pocket and in the bank to do this, Freddy.”  Fast Market Freddy answered, “Yes, I have that covered, King.”  King Libra said, “You must have the emotional and physical endurance to be successful because not everyone can do this.  You will learn more about yourself than you might ever care to know.”  “I understand,” replied Freddy, “I take care of myself physically by working out and eating right.  I meditate and understand my emotions.  I don’t let them get the best of me.  I am a model citizen in our kingdom, giving to others and respecting my family.” “Perfect”, King Libra replied, “so what is it you need from me?”  “Well”, Fast Market Freddy said,” I want to know how long this will take me to learn.”  “Ah, yes,” replied the King, “to answer your question, you must go to see the three Wise Wizards, TOLI, TOLI-O and TOLI-O-O, in that order.”

<div style=”float: right;”><img src=”http://www.rdstrader.com/tol1.jpg”></div>So off Fast Market Freddy went to first seek the advice of TOLI.  He approached TOLI’s beautiful castle and knocked on the door. “What is it you wish to know?” bellowed the voice behind the door. “It is I, Fast Market Freddy, and King Libra sent me to seek the advise of the Wise Wizard TOLI.  I want to start trading Foreign Currency and I want to know how long it will take me.” The Wise Wizard, TOLI, opened the door, touched Freddy on the chin with his pointer finger and answered, “Six months.”  “Six months?” anxiously replied Freddy, “I don’t have six months to wait.  I have bills to pay, children to feed and a wife who overspends.” “I see. Since you do not appreciate my wise answer, I advise you to go see the Wise Wizard, TOLI-O.”

<div style=”float: right;”><img src=”http://www.rdstrader.com/tol10.jpg”></div>And, off Fast Market Freddy went to seek the advice of Wise Wizard, TOLI-O. He quickly approached TOLI-O’s beautiful castle and knocked heavily on the door. “What is it you wish to know?” bellowed the voice behind the door. “It is I, Fast Market Freddy, and the Wise Wizard TOLI sent me here.  I want to start trading Foreign Currency and I really want to know how long it will take me.” The Wise Wizard, TOLI-O, slowly opened the door, touched Freddy on his forehead with his pointer finger and answered, “One year.”  “One year?” Freddy started to yell, “What’s the matter with you?  One year is ridiculous!  I don’t have the time for this and you are crazy!”   “I see. Since you do not appreciate my wise answer, I advise you to go see the Wise Wizard, TOLI-O-O.”

<div style=”float: right;”><img src=”http://www.rdstrader.com/tol100.jpg”></div>Stomping his feet, Fast Market Freddy marched over to the even more beautiful castle of the Wise Wizard, TOLI-O-O.  He knocked heavily on the door. “What is it you wish to know?” softly questioned the voice behind the door. “It is I, Fast Market Freddy, and the Wise Wizard TOLI-O sent me here.  I want to start trading Foreign Currency and I demand to know how long it will take me.  Now give me the answer I want to hear!” The all-knowing wizard opened the door, touched Freddy gently on the forehead with her closed fist and quietly replied, “A lifetime.”  “Oh, you are out of your mind, TOLI-O-O!  That’s so unreasonable and no one would ever do this!  I am out of here!”  Fast Market Freddy almost put his fist through the Wise Wizard TOLI-O-O’s beautiful Golden Doors and stormed off in a huge huff.

There is a hidden message in this trader’s fable and the hint is knowing the hand signals on the trading floor. If you can figure it out, send an e-mail to info@rdstrader.com

If you are the first “new client” to respond, you will receive a free 45 minute consultation with 20 year professional trader and mentor, Michael Radkay.

Trade Strong!! Trade Smart!!and Always Have Enough to Trade Tomorrow!!

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