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USD/CAD
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NZD/USD
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How to use market sentiment?
Keep in mind that market sentiment is not an indicator to determine buy or sell decisions, but to see market conditions. Technical analysis such as Support Resistance is very good at helping to determine the Target Price.
Open position ratio of a balanced currency pair usually has a percentage of buy and sell range of 35% to 65%. However, when there has been a very strong movement in one direction, the open position ratio can be very unbalanced between the buy and sell. And during these extreme conditions, we can determine the price reversal of a currency pair.
For example, a currency pair has a fairly extreme ratio at the time of writing as USDCAD. The sell ratio is 7% and the buy ratio is 93%. This is a pretty extreme market condition. With this basis, contrarian traders can get ready to take positions opposite the market.
Noteworthy is that taking positions opposite the market is not easy to determine the right time. Other indicators are needed that can help in determining the right time to open a position. Do not get caught up in an extreme market situation, other than that no less important is the preparation of anticipation if the prediction is wrong.
