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FTSE Down Since Thursday


Nelsy-Boy

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Hi @Nelsy-Boy, there is a surprising amount to unpack there but will concentrate on the main point. You are referring to the DailyFX Sentiment strategy which goes along the lines that as 80% of retail traders fail then 80% of retail traders must be wrong most of the time. So if 70% of retail traders are long the FTSE it is a bearish signal and you should be thinking in terms of the FTSE going lower, which it did.

See the chart below, 90% of retail traders are long in gold so that is a bearish signal. 79% of retail traders are long bitcoin so that is also a bearish signal.

Not particularly encouraging is it, especially as the stats back the signals.

sent1.thumb.PNG.208a7200b51d9f3c320198b780e99db4.PNG

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Guest PandaFace

Don’t forget that when traders close their positions it also causes pressure on the other side of the trade. 

For example if 90% of clients are net long, then closing the trade is actually selling and giving sell side pressure. A lot of people forget this. There’s also an argument that if some are going to close, some will go straight into a short trade doubleling that movement. 

The only trade net long Can do is reverse the trade to close and therefore push the other way.

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