Trading on Sentiment: Using IG Client Sentiment Data

A successful sentiment trading strategy would look to make a trade in the opposite direction whenever sentiment shows a strong directional bias. This may seem counter-intuitive but is well-founded and will be explained in this article. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 72% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Positioning is less net-long than yesterday but more net-long from last week.

How to interpret the IG Client Sentiment Indicator

The combination of current sentiment and recent changes gives us a further mixed NZD/USD trading bias. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias. Positioning is more net-long than yesterday but less net-long from last week.

• After realizing that most traders are short the S&P 500, one could reasonably assume that this must be the correct trade to place.
• While IG Client Sentiment is a useful tool, it doesn’t mean that it’s perfectly predictive.
• In subsequent IGCS articles in this market sentiment sub-module, we will go through the implementation and flexibility of this tool in varying trading circumstances.
• It is often said that clients look to sell into rising markets and buy into falling ones.

One powerful method of using this indicator is to confirm the extent of an existing trend. Among other functions like reviewing trade history and maintaining watchlists, this API allows users to analyze client sentiment information more deeply than usual. Of course, you will need pretty good coding experience to use such interfaces effectively. They also provide the brief results of the data, changes from the previous days and weeks, and what the eventual directional bias should be (figure 4). We’ll note that there are three percentage markers different to the others in the above chart—at 33.3%, 50%, and 66.6%. The 50% mark shows at which point the majority of traders is either net-long or net-short.

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Sentiment analysis is rarely a topic typically discussed in trading communities, although it does deserve merit. The sentiment is strange because it’s inherently based on the emotion of market participants and crowd psychology, whose attitudes are an accumulation of various fundamental and technical factors. Similarly, we saw net long positions decline to below 30% in March of this year when the price hit highs around 148. The combination of a new high for the year and bearish client sentiment suggested a turning point was at hand. While downside has been limited so far, it was a sign that the steady rally from the January lows had come to an end for the time being.

In fact, our sample turned net-long on September 15, 2016 when the GBPUSD traded near $1.3200; it remained net-long until it traded to $1.2600 on December 2, 2016. We need to emphasize that past performance is not indicative of future results, but going against ‘the crowd’ in this instance could have produced approximately 600 points in gains. We recommend our BEST ROBOT FOREXVPORTFOLIO v11, which is already being used by traders all over the world, successfully making unlimited profits over and over again. As the net-longs outweighed, price began moving in the opposite direction.

I have to praise the developers and keep my fingers crossed for the future. At this stage, we know which market to trade and know the direction to trade it but there are further factors to consider and these are explored in the remainder of the article. Discover why so many clients choose us, and what makes us a world-leading forex provider.

IG Client Sentiment

Traders can access IG Client Sentiment data using our interactive tool wheremarkets and asset classes can be filtered accordingly. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Regardless, one still needs to perform their technical analysis aside from observing the sentiment data.

• Traders should still look to utilize strong risk management in their trades, even with the assistance of IG CS.
• Since August 2020, we can see the red line (representing net short) was wide away from the blue line (representing net long).
• To their detriment, retail traders tend to focus more on catching reversals in strong trending markets than trading ranges.
• Positioning is more net-short than yesterday but less net-short from last week.
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise.

Since traders had become increasingly more net-short, it’s no surprise to see this line advancing upwards. As confirmed by the report, the sentiment was likely to become bullish with more sell than buy orders. Moreover, we’ve drawn a trend line and plotted a 200-day exponential moving average in the chart below.

Plan your trading

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/CHF prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Germany 40 prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall.

Recent changes in sentiment warn that the current GBP/JPY price trend may soon reverse lower despite the fact traders remain net-short. Traders should consider bullish directional bias until there is a cross between the two. We can observe the lines spreading apart at various intervals by comparing the number of net short and net long clients on the axis. As the red line rose (suggesting more sellers), the trend continued its ascension.

As with any concept, sentiment can frequently change even throughout the day. The other drawback is IG client sentiment data is only limited to the number of clients trading with IG (reportedly around half a million) instead of the entire forex market. This is presented in either a percentage form or a ratio form (dividing the larger percentage by the lower percentage). Simply put, retail traders contribute only a certain percentage of market input so naturally other factors will have influence on the respective market. The use of IGCS as a technical indicator can allow traders to confirm or refute signals produced by their wider trading strategy.

The combination of current sentiment and recent changes gives us a further mixed US 500 trading bias. The combination of current sentiment and recent changes gives us a further mixed EUR/JPY trading bias. The combination of current sentiment and recent changes gives us a further mixed Germany 40 trading bias. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed AUD/JPY trading bias. An RSI divergence occurred, which would have been the second reversal trigger for this position.

This section is critical and will provide practical and actionable tips for implementing this indicator. Depending on the trader, this tool can be the first or last point of reference. The blue area represents the Percentage of Traders Net-Long the FTSE 100, while the red area represents the Percentage of Traders Net-Short. When ig client sentiment the traders net-long outnumber those short the centre line is a thick blue, and if traders net-short outnumber longs the line is red. The GBPUSD entered a strong downtrend through late 2016 and traded substantially lower, and most of the GBPUSD traders in our sample bought into these declines and thus remained net-long.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger France 40-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger FTSE 100-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Wall Street-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias.