Sentiment in the forex market

As public interest in the FX market has skyrocketed, so too has the
amount of technical and fundamental research available to aspiring
traders. An area that has failed to receive the same amount of attention
is often considered part of the technical approach: sentiment. After
the news releases are digested by floor traders, the fundamentals digested
by economists, and the latest comments from the central banker are dissected,
the market’s trend is still a product of underlying sentiment. That
is the premise of this book. Much (if not most) of the information fed to
retail traders is of little use when it comes to making money by trading.
Trading is hardly as simple as buying or selling, because an economic indicator
is good or bad. Similarly, the game is not as black or white as buying
or selling, because price is above or below a moving average.
For one, I hope to prove that traditional approaches such as the economic
indicator approach do not work. No consistent correlation exists
between the U.S. dollar and U.S. economic indicators, but conventional
wisdom says that the two move in lockstep. Why is this approach followed
so fervently if its foundation is rooted in falsities? The reason that markets
move in identifiable patterns is probably the same reason that many
accept as gospel the conventional approaches to market analysis and trading
that have marginally successful track records at best. That reason is
the propensity for humans to follow the crowd, especially in situations as
emotionally driven as trading. Although there are no doubt very successful
news traders, the cost to the trader is significant: an expensive machine
such as Bloomberg or Reuters, turbulent market conditions just after a
news release, and most important—the emotional impulses that are our
worst enemy in trading are heightened, and the ability to make a rational
decision just after a news release is greatly reduced. I think that I can share
with you a better (and cheaper) approach to analyzing and trading the FX
market, an approach that will give you an edge, if only because you are not
following the crowd.
Sentiment indicators such as the Commitments of Traders reports are
followed by many market participants, but I have developed indicators

Download  Sentiment in the forex market.pdf

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