Sentiments in the Financial Markets

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  • Post category:Forex
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  • Post last modified:October 21, 2020
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Out of no where, the USD took a nose dive! The technical analysis, the fundamentals, none of these pointed to an eminent drop in price of the United States Dollar.

We immediately suspected market sentiments, but this time, the sentiments were fueled from the President himself.

The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage…and the Fed does NOTHING! Our Dollar is now the strongest in history. Sounds good, doesn’t it? Except to those (manufacturers) that make product for sale outside the U.S.

— Donald J. Trump (@realDonaldTrump) August 30, 2019

What is market Sentiment and how to use it to your advantage or at the very least, avoid falling prey to it’s effects on the market?

Market Sentiments

Market sentiment (also known as investor attention) is the general prevailing attitude of investors as to anticipated price development in a market.

Today, many bot’s are actively scanning over 500 million tweet’s a day to try and predict the general market sentiment to use in their trading strategies.

Being naive or indifferent to the activities of these bots and their effects on the markets could be detrimental to the general growth of your portfolio as a trader.

Market Sentiment’s are not the premise of the forex market alone, indeed there is a strong correlation between market sentiments and the stock prices.

A study in 2015 came to the conclusion that, Forex prediction through the text mining news is effective and viable

How does One Benefit from Market Sentiments?

It is obvious to you that you can not, and should not ignore the general sentiments in the market, regardless of stocks, bonds or forex, there is a high probability that sentiments could make your technical analysis useless, and drive price in whichever direction it wants.

If you are a new trader, getting a grasps of the general sentiments of the market might be hard, but you can solve that problem by actively follow Forex market news releases and using it to your advantage.

Sentiments are highest during news release, most often, sentiments are formed based on the news released.

Having a thorough understanding of the new’s and it’s implication on the Forex market could be a huge advantage to you.

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