Client sentiment indicator

When trading the financial markets, it can be useful to know what particular assets other investors on the platform are trading. This is where you can activate our client sentiment tool on our Next Generation trading platform. The trading tool reveals the behaviour of other traders of all experience levels, including whether their positions are long or short, their position value, and whether the market that you are looking to trade is in a bullish or bearish phase.

Built-in sentiment trading software is updated in real time and can be used for over 10,000 financial instruments. Client sentiment is typically considered by traders as part of their trading strategy, alongside the usual fundamental and technical analysis practises. Trader sentiment can be applied to all markets, but most notably forex trading and the share market.

Market sentiment

Market sentiment refers to the overall attitude of investors and traders towards the financial markets at a certain time. This is in relation to anticipated price developments for a particular instrument or market. Market sentiment can vary due to many external factors, such as economic reports, seasonal changes, national and global political events.

Some traders look for market sentiment when opening a position for a financial instrument, as this can be a good indication of where the market is heading. Market sentiment can vary due to many external factors, such as economic reports, seasonal changes, national and global political events.

As an example, if 80% of clients are going long on the FTSE 100 stock index and only 20% short, this signals a strong uptrend in the market. Other traders may then join the trade if they expect profits to follow.

If this statistic decreases to 60% long positions and 40% short positions within a short timeframe, this signals a change in trader sentiment, and there may possibly be volatility in the market, causing a shift in the asset’s price action. Traders will then start to decide whether they need to short sell the asset if they are in a falling long position, or buy the asset if they expect the price to start an uptrend.

Forex sentiment

The forex market is particularly popular when it comes to analysing investor sentiment. Forex sentiment measures investors’ attitudes towards certain major, minor and exotic currency pairs that can be traded on.

Forex market sentiment can fluctuate depending on external factors, such as rises to interest rates or inflation that is often imposed by central banks. Forex traders can therefore utilise our client sentiment tool to see how market sentiment is shifting and whether the overall signal is bullish or bearish at a particular time.

Throughout this article, we will use examples of forex sentiment through our EUR/USD price chart. We offer over 330 currency pairs to trade on with spread bets and CFDs, which is the highest number in the industry*.

Explore market sentiment for 12,000+ assets

Sentiment trading on Next Generation

Below is a video tutorial of how our client sentiment indicator works within the financial markets. To access this feature, you will need to register for an account on our online trading platform.

To locate the client sentiment tool on our platform, firstly select your instrument within the product library. You can then right click on your chosen asset and select ‘Client Sentiment’. A small box will appear with the market data, where you can filter by the type of client and receive suggestions for the most popular products to trade on our platform. Alternatively, you can open a trading chart and then select ‘Client Sentiment’ from the drop-down menu.

Platform screenshot showing how to open the market sentiment tool on a EUR/USD trading chart

Investor sentiment

Investor sentiment can be positive or negative and this also varies depending on the type of investor. If the investor has positive sentiment towards a specific market or instrument, they may choose to open a buy position. If the investor has negative sentiment, they may choose to open a short sell position.

As shown below, our client sentiment tool shows three different types of trader sentiment data: top clients, all clients and a combination of the two. ‘Top clients’ refers to traders with at least three months trade history on our platform, who have made a profit recently without taking into account spreads and commissions.

Client sentiment indicator showing investor sentiment for top clients, all clients and combined

Client sentiment analysis

The client sentiment indicator allows traders to easily switch between data for multiple investors. This is particularly useful when you are making trading decisions. For example, users of the platform may find the ‘top clients’ category influential, as it shows that they have already made a profit from their buy and sell choices. However, placing complete reliance on other traders’ successes when making trading decisions can be risky as every trader is different.

Read more about our charting features here, which includes price projection tools, live trading forums, mobile charting and module linking. Our Next Generation trading platform allows you to combine elements of technical analysis to build the most thorough trading strategy.

Open a demo account now to practise with virtual funds or go straight to trading with a live account.

Market sentiment indicator for MT4

Some user-generated sentiment trading software can also be found on the international trading platform, MetaTrader 4. Once you have installed the indicator, this will show the percentage ratio of buyers and sellers for particular assets, along with bull and bear market sentiment. This may help traders to avoid opening a losing position, or confirm their positive outlook towards a winning trade. Read more about trading with MT4 here or open an MT4 account to get started.

FAQS

What causes market sentiment?

Market sentiment is often based on external fundamental factors, such as the general health of an economy or a country, monetary policy, seasonal changes, and political and social disruptions. The release of economic indicators can also cause changes in the prices of financial instruments, so it’s worth keeping up-to-date with an economic calendar.

What are sentiment indicators?

Sentiment indicators help to show the general market mood about the current economic situation, or financial markets in general. Examples of these include social media platforms, trading forums and overriding general bullish and bearish attitudes. The VIX volatility index measures volatility and stock market expectations - learn how to trade the VIX.

How does investor sentiment affect the stock market?

As investor sentiment can be used to gauge overvalued and undervalued stocks, it can cause extreme stock market volatility. This is often preceded by a period of speculation and other fundamental factors. Learn more about fundamental analysis.

How do you read forex sentiment?

Forex sentiment indicators, like our client sentiment indicator, can show the percentage of traders that have taken a long or short position on a currency pair. For example, if 80% of traders are long on the GBP/USD, this can be viewed as bullish sentiment. Browse our range of 330+ currency pairs for forex trading.

How does market sentiment affect share prices?

Market sentiment usually drives the supply and demand of a share, which can lead to price fluctuations. If investors think that a stock is undervalued, for example, there may be a surge in demand, causing its share price to jump. Read more about undervalued stocks.

*Awarded Most Currency Pairs, Forex Brokers 2020 Awards.

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