The first step is to identify a strategy or develop a trading system. For example, a novice trader may decide to follow a moving average crossover strategy, where they will track two moving averages (50-day and 200-day) on a particular stock price movement. For this strategy, if the short-term 50-day moving average goes above the long-term 200-day…
There are generally two different ways to approach technical analysis: the top-down approach and the bottom-up approach. Often, short-term traders will take a top-down approach and long-term investors will take a bottom-up approach. In addition to this, there are five core steps to getting started with technical analysis.1
Many investors analyze stocks based on their fundamentals—such as their revenue, valuation, or industry trends—but fundamental factors aren’t always reflected in the market price. Technical analysis seeks to predict price movements by examining historical data, mainly price and volume. It helps traders and investors navigate the gap between intrinsic value and market price by leveraging techniques like statistical analysis…
The main benefit of using forex sentiment analysis is that a trader can get a better overall understanding of what the majority of market participants are feeling about a market by looking at their trade positioning. Understanding what the majority of the ‘crowd’ is doing or feeling will likely influence the price direction of a…
Some of the most popular and useful sentiment analysis indicators and reports include futures open interest, the Commitment of Traders (COT) report, and brokers’ position summaries. Let’s first discuss futures open interest. Futures open interest is used to indicate the number of active contracts (positions) that are currently open on any particular futures market and…
Forex sentiment analysis is the study of market participants’ attitudes and expectations towards a particular currency pair by analysing certain sentiment indicators and reports. These indicators and reports offer valuable information into the overall positioning of traders in the currency market. Simply put, the main goal of market sentiment analysis is to figure out what…
To provide transparency to the over-the-counter forex market, many forex brokers publish the aggregate percentage of traders or trades that are currently long or short in a particular currency pair. The data is only gathered from clients of that broker, and therefore provides a microcosmic view of market sentiment. The sentiment reading published by one broker may or may not…
The following table shows how open interest is typically interpreted for a futures contract. Futures Price Open Interest Interpretation Rising Rising Strong/strengthening Rising Falling Weakening Falling Rising Weak/weakening Falling Falling Strengthening The data then must be applied to the forex market. For example, strength in euro futures (US dollar weakness) will likely keep pushing the…
The forex market is “over-the-counter” with independent brokers and traders all over the world creating a non-centralized marketplace. While some brokers publish the volume produced by their client orders, it does not compare to the volume or open interest data available from a centralized exchange, such as a futures exchange. Statistics are available for all futures contracts traded,…
Barchart.com provides an easy way to chart COT data along with a particular futures price chart. The chart below shows the Daily Continuous Euro FX futures contract with a Commitment of Traders Line Chart indicator added. The COT data is not displayed as a percentage of the number of traders short or long, but rather as the number…
