What is Market Sentiment
The opinion of the market is what called as Market Sentiment. Market sentiment can be influenced by many things such as economic and corporate news. Many analysts and investors use market sentiment as gauge to determine the market direction it is going. A trader must realize that the overall market is a combination of all the views, ideas and opinions of all the participants in the market. This combined feeling that market participants have is what we call market sentiment.
The market sentiment is the intuitive feeling of the investment community regarding the expected movement of the stock market. Using the market sentiment approach doesn’t give a precise entry and exit for each trade, instead having a sentiment-based approach can help you decide whether you should go with the flow or not by combining market sentiment analysis with technical and fundamental analysis to come up with better trade ideas.
The Market Sentiment indicator is unique in that is it is based solely on sentiment or what other traders ‘feel’ about the market. There are various technical and statistical methods used to measure market sentiment such as advancing versus declining stocks, new highs versus new lows.
Market sentiment, as such, might be acquired from more than one sentiment analytical tool. Market direction has a half of the influence on the overall movement of an individual stock. Market sentiment acts like a unpredictable, capable of changing its mind based on certain incoming new information which can upset the existing sentiment.
When there is an upward revision of prices of most goods and services in the country the value of money decreases. Once the currency flips directions, traders will once again try to enter more trades trying to trade that same trend that is now changed and they will continue to try to trade that original trend. Most traders will get deeper and deeper into the red until they finally decide that the trend is changed and flip directions.