The sentiment of a trading market is the sum of the sentiments of thousands of traders.
The views of each trader are reflected by the number of positions they hold.
The sentiment can be seen by analyzing the number of long and short positions in the market.
Market sentiment is one of the analysis methods, but the market trading volume in can not represent the whole, because there is no central market for trading, trading volume cannot be accurately calculated.
How do we analyze market sentiment?
And spot trading market trends are similar.
We can use futures market data to predict the trend of spot trading.
The main use of futures trading market data -COT report, COT is short for Commitment of Traders, meaning position report.
The Commodity Futures Trading Commission (CFTC) publishes a COT report every Friday through Tuesday this week.
1. Understanding market sentiment analysis tools COT Report The COT report measures the net long position and net short position held in the futures trading market, which can be used as an indicator to analyze market sentiment.
In terms of timing, it is more suitable for long-term traders.
There are two types of Positions: Reportable Positions (reported Positions) and Nonreportable Positions (Nonreportable Positions).
The reported positions are classified as non-commercial and Commercial.
Reported position refers to the number of positions that are required to be reported to the Commodity Futures Commission.
Undeclared interest refers to the amount of open interest not reported to the Futures Trading Commission.
In fact, the number of scattered small-scale speculators is not worth reporting.
To perform the analysis, we only need to look at the reported positions.
Non-commercial positions include those taken by individual traders, hedge funds and financial institutions.
Most of their trading is for speculative profit.
A commercial position is generally a non-speculative position established by a large commercial institution to hedge risks.
Among them, non-commercial position has reference value.
2. How to Use COT Report to analyze market sentiment First of all, we need to chart COT report, which can be purchased from financial institutions, queried on some free websites or handled by ourselves through some online scripts.
One way to do this is to find large net long and net short positions, which are often considered to be times of trend reversals.
When there is a large net long position, it means the market is overbought, then the number of traders entering the market is reduced and the market price will not continue to rise;
When there is a very large headroom position, the market.
The market is oversold, fewer traders leave the market, and the market price will stop falling.
After discovering the trend of these futures, you can also make a judgment about spot forex trading.
Another approach is to analyze changes in open interest and long and short positions to gauge market sentiment.
Increases and decreases in the number of contracts open may indicate a strengthening or weakening of the trend.
The increase in the number of open interest means more speculators and money entering the market and the current trend will strengthen.
A decrease in the number of open interest means an increase in the number of liquidations, while an increase in the number of people leaving the market means the trend will weaken.
As fears of the new strain continued to ease, commodities and currencies surged on U.S. and European stock markets, while oil prices soared as much as 5 percent.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
