The crucial thing about trading is identifying the points of the trade entry. Once you know when you should think about how. You may have heard the traders’ motto “trade with the trend”. It means you should go along with the trend and not against it. When the buyers have a dominant position on the market, you ought to go long. And when the sellers are in control, you should go short.
One way is to trade with the trend. The other is to trade with the candles and their color. But this is not all. On the Olymp Trade platform, there are plenty of indicators whose role is to assist you in the market analysis so you can enter the position at the best moment.
In this guide, I would like to talk about the Sentiment indicator. I would show you how to set it up on the chart and how to use it in your trading. Let’s get started.
Configuring the Sentiment indicator on the Olymp Trade platform
After you log in to the Olymp Trade account, you should choose the asset you would like to trade and the chart type. Once all is set, you need to click on the graphical tools feature and find “Sentiment”.
The Sentiment indicator will appear on the left side of your Olymp Trade interface. It consists of two parts, the upper one is red, the bottom one green. Additionally, on the top of the upper part and at the bottom of the lower part there is a value in percentage displayed.
How to read the Sentiment indicator at Olymp Trade
What is it all about? The Sentiment indicator measures the ratio of all open transactions for a given asset. You have an overview of what other traders are doing at present. This indicator is sometimes called the “traders’ choice”. This is exactly because it shows what the traders choose in real-time. You can see how many percents of open trades are long positions, and how many short.
In the case when there are more sellers on the market, you will notice the red part gets bigger. At the same time, the green one will decrease. It has to be 100% altogether, after all. Analogically, when the buyers are in domination, the green part will be longer than the red one.
Pros and Cons of Using the Sentiment Indicator at Olymp Trade
- Provides a real-time view of the market sentiment.
- Can help identify possible trend reversals.
- Easy to interpret and use.
- Allows you to align your strategy with or against the majority.
- Doesn’t provide a full market analysis on its own.
- Might encourage herd mentality trading.
- May not always align with the market trend.
|With the trend||Trading in the direction of the current trend, reducing potential risks and increasing the chances of a profitable trade.|
|Against the trend||Trading against the direction of the current trend, potentially yielding high profits, but with increased risk.|
|With the Sentiment indicator||Trading based on the collective behavior of other traders, which can indicate market sentiment and potential trend changes.|
|Against the Sentiment indicator||Trading against the collective behavior of other traders, potentially exploiting counter-trend opportunities but with increased risk.|
How to use the Sentiment indicator in trading at Olymp Trade
We can distinguish two types of traders concerning the Sentiment indicator.
- Type number one is following the majority. When the crowd is buying, this type will also buy. This means he will enter a buy position when the green part of the indicator is bigger than the red one. When the red zone is over 50% of the whole indicator, which means the majority is selling, type number one will also sell.
- Type number two is the type that loves conspiracy theories. This type is convinced that brokers are manipulating the market, thus, he will go against the current mood. He will enter a buy position when the red zone of the indicator is larger, and a sell position when the green one is over 50%.
No matter you prefer to go with a crowd or against, it is always wise to check what the chart is showing. When the Sentiment indicator displays the buyers’ dominance and at the same time you may recognize the uptrend on the chart, it would be advisable to go with the majority. However, when the chart is showing something opposite to what the indicator is saying, trade rather against the crowd.
Thanks to the Sentiment indicator you can sneak a peek at what other traders are doing in real-time. Try trading with it on your Olymp Trade demo account. You are always welcome to tell us your findings, your thoughts, or ask the question in the comments section.
Enjoy your trading!
Q&A: Understanding the Sentiment Indicator at Olymp Trade
- Q1: What does the Sentiment indicator show?
- A: The Sentiment indicator shows the ratio of all open trades for a given asset, providing a real-time snapshot of market sentiment.
- Q2: How can I use the Sentiment indicator in my trading?
- A: The Sentiment indicator can be used to follow or go against the majority of traders, depending on your trading strategy.
- Q3: Does the Sentiment indicator provide a complete market analysis?
- A: No, the Sentiment indicator should be used in conjunction with other tools and indicators for a comprehensive market analysis.
- Q4: What are the pros and cons of trading with the trend?
- A: Trading with the trend can reduce risks and increase the chances of a profitable trade, but it may also limit potential profits. Trading against the trend can yield high profits but comes with increased risk.
- Q5: Can the Sentiment indicator predict future market movements?
- A: While the Sentiment indicator provides insight into current market sentiment, it does not guarantee future market movements. Always perform your own analysis and consider multiple factors when making trading decisions.
We are sorry that this post was not useful for you!
Let us improve this post!
Tell us how we can improve this post?