How to Gain an Informational Advantage Using Retail Sentiment

Jan 21, 2023

Market sentiment when used the right way, can be one of the biggest cheat codes a trader can leverage.

Here is a list of the best ways to find useable sentiment data.

There are several ways to estimate the overall sentiment of retail traders in regards to their long vs short positions, but none of them can be considered fully accurate. Some of the methods that can be used include:

  1. Using data from Forex brokers: Some Forex brokers provide data on the percentage of their clients who are long or short a specific currency pair. This data can give an idea of the overall sentiment of retail traders, but it should be taken with a grain of salt as it's limited to the specific broker's clients, and it's not publicly available.

  2. Using Social Media Sentiment Analysis: Some firms use social media sentiment analysis to gauge the overall sentiment of retail traders. This method can be useful but has a lot of noise and subjectivity.

  3. Using Commitments of Traders (COT) report: The COT report is released by the Commodity Futures Trading Commission (CFTC) every Friday and shows the net long and short positions of non-commercial traders (i.e. retail traders) in the futures market. This data can be used as a proxy for the overall sentiment of retail traders, but it's only available for the currency futures market and not the spot market.

  4. Using Retail Positioning Indicators: Some firms and websites offer indicators that track the overall sentiment of retail traders based on a variety of data sources. These indicators can be useful, but it's important to understand their methodology and limitations.

Overall, none of these methods can be considered fully accurate, but they can provide some insight into the overall sentiment of retail traders. It's important to keep in mind that sentiment can change quickly based on market conditions and events, so it's essential to use multiple methods and consider them in the context of other market data.

Hope you enjoyed this article!


- The Trade ATS Team

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