About FX Blue Trader Sentiment

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Overview

FX Blue's Trader Sentiment aggregates the open positions of all real-money accounts which are currently publishing their results to FX Blue. It is based on the net position of each user. For example, if a trader is running a grid system which currently has 20 orders open on each side, then the figures include one single net figure for that user, not 40 separate positions.

History

The Trader Sentiment indicator for MT4 shows a minute-by-minute history for the symbol over the last 2 trading hours. Positions can change very rapidly in reaction both to news and price movements. A news event which does not cause a major movement in the symbol's price can nevertheless lead to a big change in the number of people long/short. It is not uncommon for the number of users long/short EURUSD to change by as much as 30 percentage points (e.g. from 35%/65% to 65%/35%) very quickly in reaction to a major news event.

Interpretation

The Trader Sentiment is not a directional indicator. You should not buy or sell based on whether FX Blue users are generally long/short.

Instead, the Trader Sentiment can help to give you the following insights into the market:

Divergence between sentiment and price. Many traders and trading systems are basically trend-following. The percentage of people long/short will generally follow price movements. Therefore, it is often significant if there is a major change in sentiment while the price remains relatively static (or even goes in the opposite direction).
Reaction to news events. Particularly on EURUSD and GBPUSD, the percentage of people long/short can change substantially and rapidly in reaction to news without a major change in the price. The move in sentiment will indicate what other traders think about the news announcement, and may suggest future price direction.
Support and resistance levels. It is unusual for there to be more winning long trades than losing long trades for any protracted period of time (or more winning short trades than losing short trades). This often leads to profit-taking, which creates support or resistance around the current price - typically resistance if a majority of long trades are in profit, and support if a majority of short trades are in profit.

For further examples of interpreting the indicator, please see the PDF document which accompanies the MT4 indicator.

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