What is sentimental analysis in forex

Hi guys, I would like to know as to what is sentimental analysis and how does go about doing them?.

Thank You.

The Babypips course has a great section on sentiment.


There’s also a video on it at Karen Foo’s channel

I think as a very simple explanation - if sentiment is overly bullish its usually a warning the price has gone too far.

If everyone is scared witless that prices are going to collapse is often the case prices have ALREADY collapsed.

Its hard to go against the herd but often the best thing to do to make the real big money.

Sentiment analysis tries to capture these extremes in a statistical scientific way.

For me its one of the most interesting aspects of trading. And one well worthy of investigation


Just go education section. You will find the answer.

Hello Masandirex

No doubt John summarized it very nicely.

But I can give you a place to go for some specific, current examples.
Try this thread.

COT Report Analysis - a thread on market sentiment - Trading Discussion / Economics - BabyPips.com Forex Trading Forum

It’s a thread we started some years ago. It was discontinued. But I revived of late. If you don’t know what the COT report is, you can go to the beginning and learn about.

But this is just one type of sentimental analysis. I guess there’s others.

But on the other hand, I think it’s a lot of semantics. Cause, if you ask me, everything (all analysis) can be broken down into one of two categories. Fundamental analysis or Technical analysis. Now Sentimental Analysis, to be truthful, I always thought was what the COT report was. Which is nothing but knowledge of how the big traders are positioned in the futures market (which transcends throughout all the major markets).

It’s an insight into how the traders are thinking. Which is either long or short (can’t be any other way). And since they have to report what their open interest contracts are, nothing else makes sense to what their sentiment might be.

Anyway, try it out, Masandirex.
And I do agree with Kancho. You have to dig and find the answers.
But they will be all found in here in BabyPips.

Get back to us!
Tell us what you really think!



I’ve always loved the COT reports - having cut my teeth following the analysis of Ted Butler and his silver market reports.

It’s important to remember though that COT is not a timing tool - it can takes weeks or even months for COT positioning to affect the market

Which I’m sure will disappoint some who might think it’s a timing tool.

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Hey John…

Thanks for that.

That’s why I feel the best way to use the available data from that is from the angle of the trend.
— Being aware of what the current trend is
— Is it continuing
— Track it and compare

And I guess you’re right. If all traders want is to know when to get in and when to get out, then yeah, this is not that kind of indicator.

I’m glad you pointed that out. I don’t know, maybe all young traders just care about one thing only (ok, two). When do I get in, when do I get out.

As opposed to what’s going on in the market.
What’s making the ebbs and flows.
Whatever knowledge we can glean from the players minds.

Good point John.
Thanks for enlightening me.


I think the greatest value in the COT is it’s telling us which markets are likely to have the largest moves over the medium term.

From there we need to use our own individual methods for trading that market often multiple times.

But the screaming sentiment extremes in COT positioning is rare - for the past year there has been the largest short position in 10 year bonds ever (I think) among the large specs and dumb money.

That position is unwinding as the bond bears couldn’t push rates much higher. Such a lob sided short position will probably end with a major bond rally.

Which kind of brings up the point u made - the best way to use the COT is as a macro backdrop.

For the traders who like to say they use fundamentals in there overall analysis - there is little better than the COT for following the smart money in a given market.


Hi and welcome,
I have a far broader view of sentiment analysis than others who have commented. And I believe the younger generations pay far more attention to these sentiment indicators than older folks like me. But I am learning. I have it down as one of the tools (indicators) I wish to try out in future.

It is about social networking - specifically twitter feeds. Big data uses twitter feeds, for example, in trying to match election polls with twitter sentiment. Then you have the likes of Wall Street Bets and in the crypto world the fascination with tokens such as Doge and Shiba Inu. I bought a small amount of Doge a few months back just to show my son of 23 years how stupid it is to follow market hype. It turned out that I sold out 1/2 of them at more than double what I paid (after only a week) and still hold the remainder (only about $20 worth) at a bought price of $0.25. I note today Doge is trading at $0.256, so it is on my radar again. For me, that “lesson” I was trying to teach my son ended up in a lesson for me, and I have a new respect for social networking “sentiment analysis”. Just need to figure out a method of identifying an indicator and back testing it (if I can get historical sentiment data). That exercise took me down the path of trying to work out how one gets sentiment indicators from the likes of twitter feed. I now know what to do in theory, but I need a little scripting and programming education to make anything useful out of that. I will follow it up but I have many interesting distractions such as this to fill my day and evenings with. What a wonderful world of opportunity :star_struck:


Google search volume is starting to prove itself as a sort of sentiment measure too.

And yes there are now companies creating indicators measuring social media likes and comments.

Welcome to the future trader. Today, Myfxbook app shows XAU/USD as both a buy, and a long position. Which bucks the norm. And would be my signal to buy right now.


Because overall market sentiment on pairs I’ve wanted to trade, show on my charts as e.g. several buying indicators - which are lagging - and nicely following the current trend from differing sources including Myfxbook Market review - but are negated when the Myfxbook Outlook page shows a short position with actual position numbers.

To date, I haven’t researched this ‘anomoly’ that has just hit my radar over a few weeks of minimal trading. On Friday both the Market sentiment and the Outlook showed a buy and a long position opportunity on GBP/CHF - and which made a great profit had it been followed.

One trade means nothing, but it’s happened to me half a dozen times where I’ve gone with market sentiment against the position size and lost out what seemed to me to be a good trade. That also, doesn’t mean much, but I’m now more careful to make sure that my good trades market sentiment is in accord with position Outlook.

If anyone is interested in carrying out research, please let me know the outcome.

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any analysis in forex must be able to be used correctly so that later there will be no problems with it

Forex sentiment analysis is the process of identifying the positioning of traders, whether net long or net short, to influence your own trading decisions in the currency market

Hello @Masandirex,

Here’s the section of the school on Sentiment Analysis which may help you out.


Pipzilla :coffee:

For lower timeframes volume is good indicator for shortterm sentiment and pattern confirmation

Pin bar formed with ultra high volume after long bearish move shows how suddenly demand is eating the supply and is much stronger signal than pin bar on average volume. With the latter you don’t really know, if this is reversal or bears have more fuel to push down and break the formation.

Below example:

  • Green box - we have nice uptrend - volume goes up with price and goes down on correction. This indicates, that demand is stronger than supply. At the end of green box there us ultra high volume spike and candle has longer wicks. We see that supply is getting into the play, as if there would be no supply candle would close near the high.
  • Orange box - something changed, price is going up but volume goes down. Demand is drying out.
  • Pink box - price goes down with volume slowly rising - change of sentiment, supply supports the price move. Additionally confirmed by weakening volume on correction. Box ends with another down move supported with volume.
  • Red Arrow - our pin bar with highest volume for 40 candles. It looks like buyers tried to test the recent top but supply knocked the price down violently.
  • Red Box - increased volume and fast move down.

You can look at this whole formation also as somewhat flat head and shoulders, but thanks to volume you see that sentiment is changing even before lower high is formed. Giving time to plan and maybe jump in earlier.
Using classical H&S you would jump below the neck line and miss some of the move.
Using pin bar alone you would probably ignore it, as it is not “outside” the price action.

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Sentimental analysis is basically how a trader feels about the market conditions. Sometimes a trader will feel bearish and sometimes bullish over a pair of currency, and these all are a result of his own sentiments or opinions.