In the foreign exchange market, traders' overall psychological state directly influences the supply and demand of currency pairs. Many traders may be familiar with technical or fundamental analysis, but these tools do not always provide clear guidance for trading decisions. When traders learn to judge the market's psychological trend, that is, forex sentiment, it can significantly simplify the trading decision-making process.
Understanding the core concept of forex sentiment
Forex sentiment refers to market participants' views and judgments on a specific currency pair. Market psychology is driven by various factors, including economic data releases, geopolitical events, news trends, and overall market trends. However, market participants play a crucial role in determining market direction.
Generally speaking, forex market sentiment can be quantified using various tools and indicators, with the most popular being specialized sentiment indicators. These indicators provide a window into market psychology, such as the percentage of bullish or bearish traders.
Utilizing market sentiment