IG Client Sentiment (IGCS) is a tool used to represent client positioning amongst IG retail traders live accounts across a range of markets, including major currency pairs, commodities, cryptocurrencies and stock indices. Market sentiment represents the mood of financial markets and the general feeling among traders, whether they trade foreign exchange, the stock market or anything else. Understanding sentiment allows you to judge whether a market is feeling optimistic or pessimistic about the future of prices of a security, such as a stock or currency, for example.
- Although this article focused on identifying trends with IGCS and technical analysis, other factors may contribute to changes in price action that may not necessarily be in the opposite direction to IGCS.
- How do you feel about financial markets – do you think they will rise or fall in the future?
- There are two reasons why most sentiment tools are viewed in a contrarian manner.
- Among other functions like reviewing trade history and maintaining watchlists, this API allows users to analyze client sentiment information more deeply than usual.
- The data suggests about 61% of traders are presently long while the rest are short.
Alongside technical and fundamental analysis, client sentiment data can be a useful additional tool for a trader, if they know how to read the changes in positioning. As with any concept, sentiment can frequently change even throughout the day. The other drawback is IG client sentiment data is only limited to the number of clients trading with IG (reportedly around half a million) instead of the entire forex market.
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The GBPUSD entered a strong downtrend through late 2016 and traded substantially lower, and most of the GBPUSD traders in our sample bought into these declines and thus remained net-long. In fact, our sample turned net-long on September 15, 2016 when the GBPUSD traded near $1.3200; it remained net-long until it traded to $1.2600 on December 2, 2016. We need to emphasize that past performance is not indicative of future results, but going against ‘the crowd’ in this instance could have produced approximately 600 points in gains. Traders should be drawn to extreme levels (very short or very long) when analyzing sentiment, as this is where the tool provides clearer signals. As can be seen in the graphic below, there is a relatively extreme figure of 78% for NZD/USD. The figure is written in blue (representing longs) and the horizontal bar also depicts the sentiment imbalance in favor of the longs.
When the traders net-long outnumber those short the centre line is a thick blue, and if traders net-short outnumber longs the line is red. Traders will find a chart and a quick summary of recent and overall sentiment numbers. Broadly speaking, traders can use the IG Client Sentiment Indicator in two ways. An immediate distinction of sentiment is viewing it as a contrarian indicator, which is the most important yet unusual. Being able to spot any emergence of fear or greed is helpful in identifying those that are usually selling-up as prices hit the low of a price movement, and those that chase the crowd and buy just as the market heads lower. If the market is feeling positive and optimistic about the outlook then this is referred to as bull market, and a pessimistic market that expects prices to fall is referred to as a bear market.
- Sentiment indicators can alert you when a reversal is likely near, due to an extreme sentiment reading, and can also confirm a current trend.
- Sentiment research seems like a foreign and non-essential concept in currencies but has existed for as long as technical and fundamental studies.
- Although IG claims to have just under a quarter of a million clients, despite being a fraction of all market participants, plenty of examples reflect strong correlations between the tool and what happens on our charts.
The sentiment is strange because it’s inherently based on the emotion of market participants and crowd psychology, whose attitudes are an accumulation of various fundamental and technical factors. In addition, while the majority of the market will lean one way or another, every participant holds their own view on why the market is performing the way it is and where it is heading next. Traders can see the percentage of IG’s clients on particular pairs who have gone long or short.
Implementing the IG Sentiment Indicator in Forex
Find out more with our guide to trading with IG client sentiment data, as well as how to approach sentiment analysis in forex trading. But these reports are most often on a delay, may require expensive licensing fees, and/or give an uneven view of how the majority of traders are actually positioned in a given market. The data suggests about 61% of traders are presently long while the rest are short. The natural assumption would presume the overall sentiment is bullish, but this works in reverse as explained. IG suggests price may continue to fall, concluding bearish sentiment instead. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall.
The two most well-known are open interest in options, which largely applies to stocks, and the Commitment of Traders Report (CoT). The two most well-known are open interest in options, which largely applies to stocks, and the Commitment of Traders Report (CoT). With this strategy, one waits for the price to break the trend line and trade above the 200 EMA. Along with IG client sentiment data, this would have given extra confirmation to look for buying opportunities going forward. The client positioning chart further shows how these raw numbers may result in divergence between IGCS and price action. While this information is not available in the summary section, it is accessible on the sentiment report page.
Midway through the trading week, we update Client Sentiment levels – percentage of IG clients with long or short positions – for major forex pairs like EUR/USD, USD/JPY, and more. IG Client Sentiment (IGCS) is a tool that traders can use in conjunction with a broader technical and/or fundamental strategy. IGCS incorporates retail trader positioning (long and short) to formulate a sentiment bias. This is represented in percentage form (see image below) which aids traders in identifying market imbalances which could lead to possible opportunities.
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Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.
As a simple representation, when there is a general expectation of a bull market, the sentiment is bullish, positive, or optimistic (the opposite applies for a price decline – bearish, negative, pessimistic). One of the key things is looking for extremes between the two figures; the larger, the better. The two arrows which trace the price direction and the blue line at the bottom (representing the number of net-long clients) show the disparity.
Conclusion: track market sentiment as part of your wider analysis
You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake.
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While this may be true in some cases, IG’s index may conclude the trading bias as ‘mixed’ based on changes between the longs and shorts from the last day. As confirmed by the report, the sentiment was likely to become bullish with more sell than buy orders. Moreover, we’ve drawn a trendline break in the chart if traders needed extra confirmation to look for buying opportunities going forward. Due to the contrarian nature of the index, we can see a bearish trend, which is further confirmed by the price action. When you search for the IG client sentiment report, you gain a bar graph summary table denoting the number of longs (in blue) and shorts (in red) for each market, as in the image below.
In our next guide we will take a closer look at more detailed examples of how we might use the IG Client Sentiment index in our trading. IG Client Sentiment (IGCS) is a tool that traders can use in conjunction with a broader technical and/or fundamental strategy. Client sentiment, which looks at the number of long and short trades on a particular market, is a useful tool in a trading strategy. It is often said that clients look to sell into rising markets and buy into falling ones. There is an element of truth to this, but it is also important to look at turning points in sentiment, when the number of long positions begins to rise or fall. When combined with price analysis, the foundation of all good trading, a useful picture can emerge.
Regardless, one still needs to perform their technical analysis aside from observing the sentiment data. Any sentiment indicator shouldn’t be a primary motivation for taking a position but could act as a confirmation and an observational tool. Furthermore, for each market, IG provides ig sentiment indicator a better graphical representation (figure 4) and daily-updated reports to ensure traders can view the actual price movement against the sentiment data. Financial markets are fuelled by emotion and this is one of the main reasons investors can find opportunities to trade.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger France 40-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes forex ig client sentiment gives us a stronger FTSE 100-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Germany 40-bearish contrarian trading bias. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Wall Street-bearish contrarian trading bias. By looking at the change in positioning for EUR/CHF below, the daily change in net-long positions is -9%, with a weekly change of -8%. Meanwhile, the daily change in net-short positions is -20% with a weekly change of -39%, which means that clients are further net-short relative to the previous week.