The IG Client Sentiment is unique and proprietary, which can be very helpful for traders. These are just a few of the many points that will be discussed in this article:
WHAT IS IG CLIENT SENTIMENT?
IG Client Sentiment (IGCS) is a tool that traders can use in conjunction with a broader technical and/or fundamental strategy. IGCS uses retail trader positioning (both long and short) in order to create a sentiment bias. This is expressed in percentage form (see below), which helps traders identify market imbalances that could lead to potential opportunities.
SENTIMENT INDICATORS
There are very few indicators of sentiment. The two most well-known are open interest in options, which largely applies to stocks, and the Commitment of Traders Report (CoT). IGCS is distinguished by its large sample of retail traders, which provides more useful data in terms indicator readings, multiple markets data sets (FX, equities, commodities), and timely updates for these market, which are updated several times per day.
IGCS IS A LEADING INDICATOR
Traders can use IGCS to confirm or disprove signals generated by their overall trading strategy. To gauge trends, ranges and potential reversals, both fundamental and technical techniques can be used. IGCS is an additional layer of data that can be used to verify a hypothesis.
IGCS can be considered as a leading indicator as it uses past and current data to project possible future price movements however, as IGCS (retail) covers only one component of the market equation, traders should not rely solely on the IGCS tool for trading decisions. Simply put, retail traders only contribute a small percentage to the market. Naturally other factors will also have an impact on the market.
The EUR/USD chart below illustrates the projectible nature of IGCS. The chart highlights an increase in net short positions by retail traders, which coincided with an increase in price action (EUR appreciation).
IGCS AS A TECHNICAL INDICATOR: SUMMARY
We have demonstrated how sentiment/IGCS can add a unique, valuable and useful element to trader’s approaches. In subsequent IGCS articles in this market sentiment sub-module, we will go through the implementation and flexibility of this tool in varying trading circumstances.
