A successful way to trade in a profitable market is to understand the emotions of its buyers and traders. It is not difficult to identify the behavior of traders in sectors where different forms exist. The most prominent example is basic or technical identification. In any case, regardless of what commodity you trade in the course of trading, you will end up parsing the open area to understand the actions of market participants.
Of course, there are no indicators in the MT4 terminal that would indicate the attitude of the buyer to the dealer in an accessible and reasonable format. But you want to determine it, so what should you do? Use your free emotions. The aforementioned SSI indicator, a tool for determining sentiment on the Forex market, is a possible solution to this problem.
What is the Speculative Sentiment Index?
The Forex Sentiment Index shows the ratio of buyers and sellers in trading terminals. As a result, a trader can see the general position of other traders on a particular asset.
How to use the speculative sentiment index?
The Speculative Sentiment Index is used as a useful indicator of the general sentiment among traders. For example, if the SSI shows 70/30, 70% of traders are optimistic about the EURUSD pair, while 30% are bearish.
The SSI FX sentiment indicator above the scale shows the buyer's ideology, while the red part shows the trader's ideology. If the blue part of the scale can be more red, it indicates a bullish situation of opening long positions compared to short ones. The opposite situation is also evident: if the red part of the scale is long, the available short positions are on the high side.
The above SSI open position indicators reflect the ratio of buyers and sellers in light of the information provided by influential intermediaries. Of course, the SSI indicator shown above will update 60 times in 1 minute. However, if necessary, you can reduce this interval to 5 minutes.
SSI indicators can be successfully used by both intraday and medium-term traders and scalpers. It all depends on how long you can hold an open position and what goals you set for yourself. The above SSI indicator, which is updated in 1-5 minutes when trading during the M5 period, allows traders to have an idea of the market's heartbeat. It also helps to react quickly to fluctuations in the ratio of buyers to traders.
If your trading system is focused on medium-term or intraday trading, you can use data on Forex sentiment such as resistance and support points. This will help you determine the period of correction of the sector to open trades for the continuation of the basic pattern.
For this reason, the SSI indicator shown above should be updated at regular intervals of 20-60 minutes. This helps to track the price behavior near these levels.
From central banks to intraday traders, economic activity news, various factors, and the ongoing behavior of the multi-participant FX market will always influence the price formation of an asset. In a difficult reality, knowing the percentage of open positions of traders in the sector increases the possibility of making profitable trades.
SSI market sentiment indicators do not provide clear trading signals without the help of something else. In any case, if you use it as an additional signal for your trading system, it can probably show an interesting entry point.
The SSI indicator shown above is small and will not stand out because the shading of each chart is very nice. However, it is easy to trace its contours even in the MT4 terminal. Thus, due to their simple, clear display and effective use, the above SSI market sentiment indicators can be useful for both beginners and experienced traders.