Reatailers' sentiment index

Hi guys out there, how do you use retailers’ sentiment index to maximize your winning rate?

Check out the work done by FXCM on their SSI (Speculative Sentiment Index).
There are handfuls of peer-reviewed publications on the topic of fading retail traders- just use Google.

Basically- retailers are wrong most of the time and will continue selling into strength and buying into weakness. Eventually, an inflection point is reached in the market (from a price action perspective- typically exhaustion or capitulation) and retailers become overly bullish or bearish (within the context of the last x months) and the market reverses.

Bottom line- retailers are wrong the majority of the time, but every now and then they call a bottom or top when sentiment is multiple std dev’s out.

Why do you think retailers sentiment index would help? Instead of retailers sentiment index you may be interested to know about COT reports. There is a segment in BabyPips about COT reports. It is a report on traders in the futures markets in USA. You want to take notice of the non commercial positions because these are the big banks and hedge funds trading for profit.

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COT reports are lagging, by months. By the time that data comes out a fund could have completely exited the position. Can you point to any data that shows the COT reports are leading in any way?

SSI is a real-time reading on retail positions and a superior indicator if you’re looking for one- which the OP is.

True it is a lagging indicator. But false it doesn’t lag by months. The data is released on Friday afternoon US time and refers to Tuesday’s market positions in the US Futures Markets. It can be of limited benefit. For example if positions are extreme long and on release spot forex is still going long a trend reversal could be on the cards. The thing against retail data is that you get such a variety of strategies people use. Someone could be scalping and earning good profit and they go short while someone else trades on the daily chart and they go long. Both could be winning trades.

So how can i (as an intraday) trader fade the retail sentiment? Is data released after every what period?

I have to agree with @FOREXunlimited here. There’s a reason they don’t release the report the day they get it. I mean, if it was truly beneficial to us then we’d all be using it. I spent months charting the weekly COT reports with little success, once the data is released the moves are over. Sure, there could be some secret formula, but I have yet to hear about it. And if someone did happen to spill this secret they would quickly change it.

< .01% probability

Because it doesn’t exist :slight_smile:


Theres a VP video on it, called SSI. He looks at the IG Client Sentiment in the video.