2.16 Gauging Market Sentiments

Forex market sentiment analysis.

Sentiment analysis is a method to assess the mood (sentiment) of the market participants. All its participants collectively make up the overall direction of the market, whichHow to analyze forex market sentiments? may be bullish or bearish. However, a particular section or category may be more bullish in its views and this may cause a shift in the direction. Similarly, a powerful or influential analyst may be able to change the sentiment with his views. An economic event, such as the Eurozone sovereign debt crisis, may affect sentiment to such an extent that fundamental or technical factors may be completely ignored by the market participants. These constantly changing views and mass opinion are the shifting sands of sentiment, and must be taken into the account by the trader.


Sentiment analysis is the third horse drawing the ‘troika’ of market analysis.


There are various means of assessing market sentiment such as the Commitment of Traders (COT) report, specialized sentiment analysis software, polls and surveys (such as of analyst and broker newsletters). Last but not the least, the common chart patterns also give a feel of the market sentiments. Don't worry, you will come to that pretty soon.


We’ll be looking at this in more detail in a subsequent chapter, of course, but meanwhile we thought an advance peek would be useful!


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  • Gauging Market Sentiments


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