Preschool>= Lesson Status ?
Kindergarten>= Lesson Status ?
Elementary>= Lesson Status ?
Grade 1 Support and Resistance Levels
Grade 2 Japanese Candlesticks
Grade 3 Fibonacci
Grade 4 Moving Averages
Grade 5 Common Chart Indicators
Middle School>= Lesson Status ?
Grade 7 Important Chart Patterns
Grade 8 Pivot Points
Summer School>= Lesson Status ?
High School>= Lesson Status ?
Grade 9 Trading Divergences
Grade 10 Market Environment
Grade 11 Trading Breakouts and Fakeouts
Grade 12 Fundamental Analysis
Grade 13 Currency Crosses
- What is a Currency Cross Pair?
- Crosses Present More Trading Opportunities
- Cleaner Trends and Ranges
- Taking Advantage of Interest Rate Differential
- Obscure Crosses
- Planning Around News and Fundamentals
- Creating Synthetic Pairs
- Euro and Yen Crosses
- How to Use Crosses to Trade the Majors
- How Cross Currency Pairs Affect Dollar Pairs
- Summary: Currency Crosses
Grade 14 Multiple Time Frame Analysis
Undergraduate>= Lesson Status ?
- Why Keep a Trade Journal?
- Benefits of Keeping a Journal
- What Should You Record in Your Journal?
- Potential Trading Area
- Entry Trigger
- Position Sizing
- Trade Management Rules
- Trade Retrospective
- Trading Journal Statistics
- Reviewing Your Trading Journal
- Difficulties of Keeping a Trade Journal
- Summary: Keeping a Trade Journal
Graduation>= Lesson Status ?
- Which Trading Style is Best for You?
- Which Currencies Should You Trade?
- What is Your Level of Trading Experience?
- Should You Be a Discretionary, Mechanical, or Hybrid Trader?
- What Kind of Mechanical System Suits Your Personality?
- What is Your Attitude Towards Risk?
- What Kind of Stop Suits Your Trading Style?
Picking Tops and Bottoms
As you would've guessed, ideal places to go long and short are those times when sentiment is at an extreme.
If you noticed from the previous example, the speculators (green line) and commercials (blue line) gave opposite signals. While hedgers buy when the market is bottoming, speculators sell as the price moves down.
Here's that chart again:
Hedgers are bearish when the market moves to the top while speculators are bullish when the price is climbing.
As a result, speculative positioning indicates trend direction while commercial positioning could signal reversals.
If hedgers keep increasing their long positions while speculators increase their short positions, a market bottom could be in sight.
If hedgers keep adding more short positions while speculators keep adding more long positions, a market top could occur.
Of course, it's difficult to determine the exact point where a sentiment extreme will occur so it might be best to do nothing until signs of an actual reversal are seen.
We could say that speculators, because they follow the trend, catch most of the move BUT are wrong on turning points.
Commercial traders, on the other hand, miss most of the trend EXCEPT when price reverses.
Until a sentiment extreme occurs, it would be best to go with the speculators.
The basic rule is this: every market top or bottom is accompanied by a sentiment extreme, but not every sentiment extreme results in a market top or bottom.
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- What is Market Sentiment
- Commitment of Traders Report
- 3 Simple Steps to Access the COT Report
- Understanding the Three Groups
- The COT Trading Strategy
- Picking Tops and Bottoms
- Your Very Own COT Indicator
- Getting Down and Dirty with the Numbers
- Summary: Market Sentiment