How do people use market sentiment data in their trades?

This topic has 5 replies, 1 voice, and was last updated 3 weeks ago by Christian Harris.

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February 26, 2025 at 16:14 #197612 Reply
SiS
Quick question for anyone who uses market sentiment data in their trades, what do yoiu do with it?

Like, I’ve got an IG account and always see that client sentiment tab showing % of traders long/short on stuff, but idk how to actually use that info to make better calls. Do you go against the crowd? Follow it? Just ignore it?

Keen to hear how ppl actually use this in day trades 👀

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- February 27, 2025 at 13:32 #197625 Reply
  Danny
  I don’t trust it much. A lot of retail traders have tight stop losses, so even if they’re mostly long, that doesn’t mean they’ll hold their positions through volatility. The big boys know this and can push price against them to trigger stops before the real move happens.
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  - February 28, 2025 at 14:12 #197658 Reply
    SiS
    Right… Is that a hunch or you know it/ seen it?
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- February 27, 2025 at 13:32 #197626 Reply
  Steve
  Have a look at combining it with technicals. If sentiment is heavily one-sided but price is consolidating at a key level like a major support or resistance zone watch for breakouts or fakeouts.
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  - February 28, 2025 at 14:12 #197657 Reply
    SiS
    So if sentiment is heavily long and price is hovering around major resistance you’d look for a potential breakdown rather than assuming continuation? Do you have any TIs you like to pair with this data to confirm entries?
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- March 7, 2025 at 12:49 #197739 Reply
  Christian Harris
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  Research suggests that about 70- to 90% of retail traders lose money (are wrong), so be careful with sentiment.
  
  Contrary trading is a strategy for taking positions opposite the prevailing market sentiment/consensus.
  
  When most traders are long (bullish), contrarians look for signs that the price might drop. Conversely, they anticipate a potential rally if the market is overly short (bearish).
  
  For example, if 85% of traders are long on EUR/USD, a contrarian might look for resistance levels or weakening momentum to short the pair, expecting a pullback.
  
  However, strong trends can continue despite extreme sentiment, leading to prolonged losses for contrarian positions.
  
  Contrary trading works best when combined with solid technical and fundamental analysis. This ensures that you don’t just blindly bet against the crowd but also time your trades effectively.
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