Market sentiment index

After going up the mark "?" (As noted earlier, it is unknown whether the output of the upper band starting the next cycle, or just a short-term retracement) index value was bear, but after 25 hours went back to the upper area. During these 25 hours of index indicates the wrong direction: the bearish market upwards. However, this does not necessarily mean getting money because the upward trend, according to which during this time was the market has never been broken, the correct choice of benchmarks for open positions, no short position would not have been opened here. The next visit of the Index at the upper region led to the formation of the peak indicated by the arrow of the incident, which was the beginning of the next cycle. At this point, clearly shows that the index has shown early next market decline ahead. Judge for yourself: with the continued de-ho prices up, in withdrawing from the upper area index have already shown that the mood was bearish (bear), so focusing on these indications of the Index, it was possible to successfully take a short position at the top of turn (from a level of about 106.20).

While the index is out of the overbought to oversold (state bear), it indicates that the market sentiment is bearish. In this chart can make pretty big kickbacks up, sometimes a half-two figures. Methods of limiting losses and locking-in had to be used here in the same way as always. But the index, until he came to the bottom of the range, each upstroke considers a rollback, after which it is necessary to open a short position. And in most cases, the index is right. This is confirmed by statistics, tracked by the graphs of currencies. If the Index, before reaching the lower region, returns to high, then the state bear canceled: the index in the extreme areas, we believe that the market is not a certain mood. The index is constructed so that it usually falls into the high, the market is clearly going up, but at least a significant rise of the market becomes overbought, therefore, the rise should be replaced by the recession. At what point did this change happen, no one knows, but just in case, again, we should be ready to open positions in any direction up to continue the course and down to break the trend. So, in fact the market and there is no particular mood, because here he is at all times ready to change it to the opposite. After the release of the index from high to mid section market again assumes the state bear, and from that moment, we only short positions. Any upward movement is rolled back, the turn which to sell.

Also, do not forget the main property, which applies to sentiment index, and many other technical indicators: positive values correspond to the growth of the market, and negative - decrease. But the focus at the opening positions are not directly displayed on the index direction (up or down) should be very careful and only after the collection of relevant statistics. Target index did something else: his task is not to generate specific signals buy / sell, how much to say about the most likely direction of future development of the market on a scale typical moves hourly charts currencies. Should therefore be used as a filter to select the signals supplied some given trading system.