Good day forex trading koalas !
It is me Marvin again with yet another trading tip.
Imagine a carpenter. He got his woodworking skills and to put those skills to work, he will need tools.
LOTS of tools.
We as forex traders are the same. We have our skills and we need the tools.
In this forex article i will introduce yet another tool in our toolbox to help with forex trading. It is called the Investor Sentiment Index. But first here are some statistics :
People often say that 9 out of 10 forex traders fail but the table from a broker above suggests a different statistic. It seems that 7 out of 10 forex traders fail.
Now if we knew what side of the trade that most losers are taking, then it will be easy for us to trade against them and potentially gain a profit ! Well, good news for you. There exist such a wonderful tool and it is called the Investor Sentiment Index published by many forex brokers free of charge !
Here is an example of one:
From the chart we can see that 73.43% of traders are long on the USD/JPY. Should we follow the majority? Based on the anti retail trader concept,
Earlier on we explored that around 7 out of 10 retail forex traders are losers and hence the majorities are probably the losers in forex.
In conclusion, those long on the USD/JPY are likely to lose. The only logical thing to do is to probably find opportunities to short the USD/JPY.
As a general rule, we ignore the other pairs that are not at the extreme ends because if long and short positions are rather balanced, this tool is not feasible here.
Use this new found forex trading superweapon against Wall Street only as a supporting tool. DO NOT enter trades based on this alone. As usual, basic forex concepts such as proper money management applies. Forex trading is risky and you may lose more than you invested.
Marvin is a Forex Koala and usually trades intra day with an extra dose of fundamental analysis! Connect with him on our facebook page.
Related Forex Articles from the Koala Forex Training College.
- Proper Money Management is important in forex trading
- Understanding margin and leverage is important
- Proper planning of stop loss and take profit is crucial