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Hello friends Forex traders.
we All know that generally the market crowd is usually wrong. All technical indicators are, ultimately, trying to Express different indicators of the mood of the crowd to understand where the market will go. As a rule, a major landmark on the foreign exchange market is the price, so as to obtain accurate information, such as the number of committed purchases and sales on the Forex is not possible due to the lack of a single center for processing information.
But dealing centers have such data. Today we will analyze the indicator "Cayman", which gives the opportunity to look behind the "curtain" of one of the brokers.
the sentiment Indicators are graphical or digital indicators that help to determine the opinion of a group of people about the state of the market. If we talk about the sentiment indicators in relation to financial markets, it should be noted that they show the overall mood or, as is often said, the positioning of market participants regarding future price behavior of the analyzed tool.
Trade against the crowd
the Most important question: what practical benefit can be derived, having the ability to gauge market sentiment? If you learn how to properly assess the level of market optimism and pessimism, this can be a good to earn.
for Example, when the market is dominated by bullish sentiment means that the majority of participants are in long positions because they believe that the price will continue to grow. Accordingly, when bearish sentiment prevails, it means that the majority of market participants are short positions because they believe that the price will fall further. However, as you know, everything has a limit, therefore, the market is an impossible situation, when all players are buyers or sellers, or all make.
At the first signs of extremely bullish or extremely bearish mood a trader should think about protecting unrealized gains and, possibly, about the opening position based on the change of trend. Key market turning points usually happen when the majority of market participants (60% or more) are bullish or bearish. In other words, at a time when the vast majority of traders start to believe in the strength of the trend and join him, it was at this point and begins a treacherous turn. On the other hand, most of the time the market is in a state of consolidation or a mild bullish or bearish trend. In such market situations better and to refrain from trading.
Define the General mood of the market
Thus, in order to understand what is the impact of the market on a financial instrument you are trading, you need to determine the General mood of the market. In technical trade, the main principle is the study of what do the market participants, not what they say and think. What are the tools that can measure market sentiment?
First of all, it should be noted that the forex market is a decentralized market, so to create a versatile indicator that reflects the sentiments and opinions of all participants of the Forex market is not possible, because accurate and reliable information on the total number and volume of trades in this market is missing. However, a major broker whose services are used by tens of thousands of traders, it is possible to propose an indicator based on information on the status of open positions and pending orders within the company. A great example of a company AMarkets, traders which is enough in order to most objectively determine the current situation on the market.
AMarkets offers traders a unique development indicator Caiman, which aims to identify potential extremums market, heralding the beginning of the breaking of the trend movement. It looks as follows:
the Bottom chart – the indicator itself, the upper – graph of prices.
How to use the indicator Caiman ?
the economic sentiment Indicator shows the percentage of traders buys and sells currency, that is who dominates the market. Caiman allows you to stay on the opposite side of the market crowd, because no one has repealed the rule: if you want to trade with the profits – remain in the minority.
Cayman has a fixed range of values from 0 to 100. If increasing the volume of purchases on a particular currency pair means that the majority of market participants are buying the currency. If increasing the volume of sales – a bet made on a pullback. It is remarkable, but the extreme values 0 and 100 are almost never achieved.
the indicator of market sentiment has its own critical value, the so-called extrema. It is important to remember that critical levels on different currency pairs different. If the currency pair in the past unfolded upon reaching 65% of the value of the number of long positions, most likely, this value is the critical level, and monitor the signals possible reversal to do it. If another pair unfolded only when 90% of the value of the number of long positions need to monitor for reversal signal when it reaches this value.
here is an example: for EURUSD critical levels are levels of 30 and 70 Cayman. If the percentage of orders that are open in one direction, reaches a critical value, this can be viewed as a strong signal not only slowing trend and long-overdue correction, but the probability of a trend change.
the Levels of 30 and 70 indicate overbought or oversold market. If Cayman will enter the zone from 0 to 30, it is understood that the currency pair has entered oversold territory – expect a reversal pair up. If Cayman was in the zone from 70 to 100, it means that the currency pair is in the overbought zone – the time preparing to move down.
In the screenshot above you can see how the Cayman indicator on EURUSD for a fairly short period of time at least five times reaches the overbought zone, signaling the high likelihood of a collapse of quotations of the Euro. That's what happened: throughout the month, when Cayman was in the zone from 70 to 100, showing the opinion of the majority that the European currency will rise, quotes steadily declined. As a result, those who used the signals of this indicator, we were able to earn 500 pips profit.
Chart Caiman over a longer period of time also proves that in moments of extremes in bullish and bearish sentiment (the levels 70 and 30 for EURUSD) in most cases, there is the breaking of the trend movement.
Customers AMarkets indicator of market sentiment Cayman is available not only in the personal Cabinet, but in the MetaTrader 4 platform where it is possible to choose any variant of its display: the indicator or widget. This greatly expands the boundaries of the analysis and creates a huge opportunity for building expert advisors based on the mood of the crowd.
How to set the indicator of market sentiment in MT4 platform?
Download file indicator CaymanIndicator.mq4; Start MT4 AMarkets; Choose menu "File" then "Open data folder"; Go to the subdirectory "MQL4Indicators" and copy the file "CaymanIndicator.mq4"; Restart the terminal MT4 AMarkets; Find the area of the "Navigator" in the terminal; then in this window click on the plus sign opposite the section "Indicators". Next, from the drop down list drag and drop the indicator Caiman the pre-open chart with the desired currency pair and timeframe.
currently the indicator Caiman can work with the following instruments: EURUSD, GBPUSD, USDJPY, AUDUSD, NZDUSD, USDCAD, USDCHF, EURJPY, EURGBP.
Data is taken from the preset in the terminal symbols, access to schedules which you can get from the menu "market". To do this, click with the right mouse button in market watch window and select "Symbols".
All available analysis tools are in the "Cayman". Double-click on the desired symbol that appeared on the market.
Now you can open a chart of sentiment in the form of candles directly in the terminal MetaTrader4.
How to install the widget — the current value of the indicator Caiman in MT4 platform?
the Indicator shows the ratio of purchases to total trading volume in percent. For example, Caiman, equal to 50% means an equal number of purchases/sales; 70% — prevail.
installation of the widget: Download the archive with the widget indicator CaymanVidget.zip to unzip; Run MT4 AMarkets (important: the indicator works in MT4 and other brokers); Choose menu "File" then "Open data folder"; Go to the subdirectory "MQL4Experts" and copy the file "CaymanMarker.mq4"; Restart the terminal MT4 AMarkets; Select menu "tools", then "Settings", then the tab "expert Advisors".
Tick the "Allow WebRequest for the following URL" and add the URL: https://my.amarkets.org/trader Drag the EA CaymanMarker in the chart window.
Those who do not want to constantly monitor the changing market sentiment, pending the achievement of the extremum of the next available Advisor Caiman, an automated trading system that generates trade signals based on sentiment, and oversold or overbought the analyzed pair. Download Advisor can be in your account under services — an indicator of sentiment Cayman. Installation is similar to installing any other adviser.
the Comparison with Myfxbook Community Outlook
As the correct data let's try to compare with an independent source.
a Similar service that displays the current market mood is available on the website myfxbook. The service at the same time shows the number of long and short positions. In addition, you can choose between the display of number of items and amount involved.
At the top of the page shows the exact absolute and relative number of transactions.
the Feature of the service is to display volumes by country. On the interactive map you can determine who is trading which side and in what volume.
Despite minor discrepancies, the testimony is generally consistent with the economic sentiment indicator AMarkets. The difference is that the indicator shows the local volume inside the broker when myfxbook makes a comprehensive assessment.
the result of this spalski indicator not reflected on the myfxbook data, but ultimately the number of buyers and sellers aligned. In the example to the left, data on the share of long positions in AMarkets, to the right of the myfxbook data on the absolute number of long/short positions over the same period.
the Output is
of Course, the fact that the economic sentiment indicator reaches its extreme values, does not mean that a trader should immediately begin to search for opportunities for purchase or sale. Cayman should be considered as an auxiliary tool, indicating the preferred direction of the transaction. It is also important to remember that the indicators/indicators of market sentiment are most effective on the daily charts and larger time frames.
And again we draw your attention, as this indicator is exclusive to Amarkets, you can download it from your personal account on the website of this broker.
With respect, Alexey Vergunov
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