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Sentiment data compiled from weekly Commitments of Traders reports. Learn about EWI's round-the-clock intraday Forex market coverage. COT hedging data is plotted inversely to visually parallel what is forex market sentiment movement.
See explanatory notes below. To learn more about Commitments of Traders COT data and how to read our charts, please click here for information. Large Speculator Sentiment - U. Descriptions One of the best measures of trader sentiment that can give an insight into Forex trading patterns is to look at hedging activity in the currency futures market. It's important to remember that the futures market exists for one central purpose - transference of risk. That risk is transferred to speculators hoping to profit from a rise or decline in a particular futures market contract.
As it relates to Forex, large, institutional and governmental FX traders all have risk exposure to their positions in the Forex cash i. Commercials have also been dubbed the "smart money," because their position tends to give them a better insight into the market, and in many cases, they are the market. The contracts are designed to reflect changes in the US dollar value of each currency, and contract values are quoted in US dollars.
Consequently, if the value of what is forex market sentiment of these contracts rises, it means what is forex market sentiment it takes more US dollars to buy that currency; if the value declines, it takes less US dollars i. When studying the charts, here are a couple of things to keep in mind. To be classified as a Commercial, it means that the Commercial has an opposite position in the futures market than they have in the Forex market.
Therefore, if they are net long a particular currency in the Forex market, they are net short that same currency in the futures market. In that sense, the Commercial position can be looked at as a contrarian indicator for the particular currency. Secondly, different Commercials will be long or short the same currency in the futures market, so to determine where the greater Commercial strength lies, what is forex market sentiment look at their net short or long position, which is simply the difference between the volume of all Commercial contracts that are held long, and all those that are sold short.
If the result is positive, then Commercials are primarily net long; if the result is negative, they are primarily net short. When they are net long, they are primarily buyers of the currency in the futures market and sellers in the FX market. When they are net short, they are primarily sellers of the currency in the futures market and buyers in the FX market. A what is forex market sentiment above or below the zero line is the threshold to determine the net Commercial position.
Note that we now plot the COT data inversely on our charts to visually parallel the Commercial net position with price action in the market. Consequently, if the COT chart data is rising, then market price for that currency against the USD also tends to be rising, and vice-versa. What is forex market sentiment note that these charts look at the individual currency, not the currency pairs, where the What is forex market sentiment may either be the base or cross currency.
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