Do you take a look to the market sentiments when predicting?

In a previous topic i asked community members about their preferences on Wich TA indicators do they trust more when trading?…or predicting :slight_smile: …But today i want to ask fellow Pynksters here if you take a look at some market sentiments indicators as well, no matter if you are going to trade or predict.

Sentiment Analysis in trading is a field i consider still undervalued even though many people use it on a daily basis.

I usually check periodically the market sentiment mostly on crypto markets (because this is the field in which i mostly move my small investments). Some people think that looking at social sentiment when trading or predicting can be beneficial when trying to guess future movements in price of a given asset while others think that this is a waste of time and that looking at and relying on Technical Indicators like Fibonacci Retracement levels and others is the best shot to get an accurate prediction or to enter on a given trading position.

My humble opinion is that the combination of both(Technical and Sentiment) could be a powerful tool to make more accurate predictions. Do you use sentiment analysis when trading or predicting? …is is worth…or not? :nerd_face:

4 Likes

Hi Deyner, I’ve never checked the sentiment of the market…where do you use to check it?
Actually I am not so sure if it could be beneficial to TA but at least I think I’d like to get a check out of curiosity! :smile:

3 Likes

Consult all the charts you’d like, all the data in the World; one thing will always hold true—the future is necessarily never found in the past. What we “deduce” from empirical data is actually “induced.”

Technical Analysis is Inductive and Invalid; however, through Hypothetical Empirical Deduction, we place a very strong faith in Technical Analysis. That in itself can aggressively push markets…so much so, that some can only see absolute fact, truth in Technical Analysis. A failure is in not enough information, or in not enough variables considered. And when that sort of faith begins to be normalized amongst Market participants—the greater their number, the more drastic and the more frequent those participants will be shown an unfortunate reality. There is no value in blind faith…literally.

The Market is entirely driven by sentiment (and, yes, I understand that there are measures of Market Sentiment; I will disregard quantized measures of sentiment as just another part of Technical Analysis); BUT! People are fairly sentimental toward Technical Analysis…go figure! One should always be gauging Market Sentiment…including the relative sentiment for Technical Analysis.

Cryptocurrency is a perfect example. Through 2020, BTC has gone from being definitely not a currency, then to an asset correlated with the S&P500 to not really a correlate, then possibly a currency, then a commodity like Gold, & now the “New Gold”…& maybe a viable currency based on popularity. And BTC vs all other altcoins is comparatively not that volatile…yikes!

The Technical Analysis of BTC, yeah, sometimes it’s a hit…(?). But it is pure sentiment that drives BTC. Well, what sentiments…? The sentiment for Technical Analysis isn’t too strong…BTC is supposed to be anywhere between ~$20,000 USD to upwards of ~$500,000 USD per 1 BTC, going hyperbolic months ago! …Or, ~50:50, utterly collapsed and worthless…months ago! …(?)

What drives BTC? Aside from the Zealots still holding on for a Market Miracle…(?)… I’d say both Regional and Global unrest/ conflict (not necessarily war, but war is sufficient!) /disaster drive up BTC in the short term; shifts in Government spending and/or monetary policy by any one of the ~top 20+ Global Economies; its perceived value as a solid long-term hedge (there’s always another halvening…until there isn’t…!); and the longer term standard S-Curve relative the Adoption of Innovation (i.e., it’s more well known and used over time).

Otherwise, it’s also subject to manipulation by unknown players (whales that can drop BTC by $500 in an instant, or pump up even more than that via subtle, incremental buy-ins over 30, 60, 90 days). This is deeply problematic because it pushes people away from its potential use value, & draws in people that will sit on it as if it were an investment. But, IF its use value is questionable (not strictly because of whales alone; BTC makes for slow transactions, & consumes a tremendous amount of energy to keep operational) and IF investment as a hedge loses appeal with no more halvenings, THEN what is left…? The adoption S-Curve…(?). Hope that Capitalism takes a break…(?).

I think more likely a push toward ATH, followed by rapid extraction of wealth by those savvy enough to understand and read Market Sentiment, and by those already wealthy, unaware or unphased, through a cruel weaponization of Market Sentiment…not really all that different than the sudden appearance of an armed robber, advantaged by holding a handgun, and demanding of some random person they hand over all of their money, him or herself disadvantaged and vulnerable (someone strictly into Market Technical Analysis I bet…), simply because they are not holding a handgun (OR! …? A Tactical Nuke…? I’m not here to sell the US 2nd Amendment…)—that’s the Sentiment of a Safe Society.

3 Likes

I didn’t know there were market sentiment indicators out there, but yeah, I do take it into account… the market rally on Monday was 100% predictable with the Pfizer announcement + certainty in the result of US elections, market sentiment was obviously bullish

3 Likes

I use market sentiment ocasionally to look for possible change of price direction, fear and greed index in most cases.

3 Likes

As mentioned by @predictor, CNN’s Fear and Greed Index is an often referenced sentiment indicator.

What some may not be aware of is that there’s an equivalent for Bitcoin: Crypto Fear & Greed Index:

As tools, I’m not sold on them. Yes, they have the ‘power’ of aggregating multiple indicators / measurements and should benefit from any confluences found - but they can be quite ‘laggy’. So they may be OK as confirmation tools for medium-term swing-traders (weeks / months), but I’m not convinced of their value on shorter timeframes.

When it comes to the markets, two of the most referenced tenets are:

  1. Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffet
  2. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell” – John Templeton

So the rational thing to do when sentiment indicators are showing Greed or Extreme Greed would be to sell.

But, as Gary Schilling is fond of telling us: “The market can remain irrational longer than you can remain solvent.”

Decisions, decisions …

5 Likes

The make or break moments begin when extreme greed/fear sometimes just won’t stop :smiley:

2 Likes

Well @Tradelta, many traders(not everyone, of course) often look at market sentiment before making investment decisions because the theory says that when social sentiment on a given asset is possitive this is correlated to a bullish market on rise, while a negative sentiment means the opposite…is going bearish. TA and Sentiment are, of course, two different things but i think that experienced traders can always seize the best of both worlds so the aggrgated information can help them made more reliable(maybe not accurate) trading movements.

I use https://omenics.com to check the social sentiment on cryptocurrency assets. :slight_smile:

When investing, your capital is at risk.

2 Likes

Aaaaaa…now i see!! Thank very much for this one Deyner😁

2 Likes
Disclaimer: any information found on the Community platform does not constitute any form of advice or recommendation by Crowdsense Ltd. and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.
Copyright © 2020 Crowdsense Ltd.. All rights reserved.