How to Use IG Client Sentiment to Create a Trading Strategy

Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex. We’ll note that there are three percentage markers different to the others in the above chart—at 33.3%, 50%, and 66.6%. At 33.3% Percentage Long, there are two traders short for every one long. The 50% mark shows at which point the majority of traders is either net-long or net-short. To make the analysis easier, DailyFX provides a comprehensive report on major markets, showing IG sentiment overlaid on price. To get the full report, navigate to the sentiment page and click on the green button labelled, “View Full IG Client Sentiment Report”.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-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 EUR/USD-bearish contrarian trading bias. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/JPY-bullish 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 EUR/CHF-bearish contrarian trading bias. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bullish contrarian trading bias.

How client sentiment works

You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Trading forex markets using client sentiment requires an account with a forex provider like IG. Many traders watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on client sentiment.

When 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. 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.

EUR/JPY

The IGCS gauge shows that only about 20% of retail traders are net-long USD/JPY. Since an overwhelming majority of them are biased to the downside, this is offering a bearish outlook for the broader horizon. Opportunity arises for both trend followers and contrarians with client sentiment over 60% in either direction in all six USD pairs below. In the above diagram, price is in a strong uptrend and sentiment is showing over three times more short traders for every long trader, therefore, this can be regarded as a bullish signal.

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• Similarly, we saw net long positions decline to below 30% in March of this year when the price hit highs around 148.
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall.
• Most CFD and spread bet traders tend to fade momentum – selling in an upward-trending market and buying into a downward-trending market.
• Trading on sentiment data can help traders identify trends in the market that may not be obvious to novice traders.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CHF prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact https://g-markets.net/ traders are net-short suggests US 500 prices may continue to rise. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall.

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Likewise we often look to sell into a market where price has risen, and quickly we see why most traders tend to go against the prevailing trend. The top section of the diagram shows how price has evolved (green and red candles) and the blue/red sentiment line shows when traders are net long/net short. If there is a large distance between the sentiment line and price, this can be considered as a signal to trade in the direction of the trend.

Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

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DailyFX provides client sentiment data based on all live IG CFD trades in the forex, commodity and indices markets and acts as a contrarian signal. A contrarian sentiment trading strategy would look to make a trade in the opposite direction whenever sentiment shows a strong directional bias. This may seem counterintuitive, but is well-founded and will be explained in this article. Using IG’s Client Sentiment tool as a contrarian indicator can be viewed as ‘fading the crowd’ – in other words taking the opposite direction of retail traders. All of this is made possible with IG’s real-time data on the most frequently traded markets, which can be used in any sentiment trading strategy. We want to clarify that IG International does not have an official Line account at this time.

When combined with price analysis, the foundation of all good trading, a useful picture can emerge. In the above example our sentiment indicator shows that traders are overwhelmingly short the EURGBP, but this does not mean we should simply buy. Instead we can look at the IG Client Sentiment index as giving us a directional bias – it suggests whether you should look for opportunities to buy or to sell. In our next guide we will take a closer look at more detailed examples of how we might use the IG Client Sentiment index in our trading. The information 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.

Please consider the Margin Trading Product Disclosure Statement (PDS), Risk Disclosure Notice and Target Market Determination before entering into any CFD transaction with us. We have shown how sentiment/IGCS can be a unique, proprietary and potentially helpful addition to a trader’s approach. 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.

The direct overlay of client sentiment onto price data allows the trader to track both in tandem. And indeed by studying these charts it is easy to see how market prices and sentiment are most often quite correlated. Most CFD and spread bet traders tend to fade momentum – selling in an upward-trending market and buying into a downward-trending market. It’s human nature to try and look for relative bargains, and thus we might look at a market which has fallen sharply in value and buy.

Bitcoin USD

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. The Japanese yen weakens to its softest since November, while retail traders adopt a bearish ig client sentiment stance to USD/JPY. Use this to see how IG client accounts with positions on this market are trading other markets. Data is calculated to the nearest 1%, and updated automatically every 15 minutes. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.