Using Retail Trading Sentiment Data.

*How I used retail trading sentiment data for US Oil to further increase my long position bias*

This blog post is going to follow on from a previous blog post I did way back in March 2019 on the subject of Retail Trading Sentiment Data. If you haven’t read that blog post then you can get to it by clicking on the link below.

https://diaryofafinancekid.com/2019/03/22/trader-sentiment-data-be-the-minority/

Retail Trading Sentiment Data is the summary of all net long and short positions on an instrument held by retail traders.You can then use this data to see how price is reacting vs the overall retail markets bias and place your own trades accordingly.

The main idea behind using retail trading data is that the overwhelming majority of retail traders lose money. So therefore the probability of success by trading in the opposite direction to retail traders is high.

Where do I access retail trading sentiment data?

https://www.dailyfx.com/sentiment?ref=SubNav

The retail trading sentiment you can access via the link above is taken from the IG broker trading books so it is limited by the fact it does not represent the whole of the retail trading market. However, IG are one of the biggest brokers in the world and it is somewhat save to assume that the net long/short bias’ on each financial instrument will be similar enough to the wider retail trading market and therefore good enough to use.

The picture below is an example of the data you will see.

I don’t use retail trading sentiment as a definite requirement in my trading strategies but I do regularly check the data to keep track of how retail traders are positioned across the finical markets. I then use it in conjunction with my existing technical analysis to further increase my confidence in a specific trade.

In this example, it was a recent long position that I have entered on US Crude Oil. You can view my technical analysis and track the progress of the trade live via the TradingView platform by clicking on the link below.

https://uk.tradingview.com/chart/USOIL/eO8pBbZB-US-Oil-Long-Trade-TREND-CONTINUATION/

Let’s look at the basics analysis of the US Oil chart and then compare that to the retail trading sentiment data.

US Oil 4 hour timeframe chart

The basics of the analysis was a simple trend continuation play. I was using the bullish trendline that had been supporting price since early October and just buying the higher lows. As you can see on the chart above, the trendline produced multiple rejections and consistent higher lows which were all very good buying opportunities.

So, what was the retail trading sentiment data showing?

US Crude Oil Retail Trading Sentiment

Net short positions of 62% showing that the majority of retail traders are still trying to sell US Crude Oil at the exact levels I was planning to buy at. This is mainly because of the sell off that occurred that took price back down to that bullish trendline. 62% of retail traders on the IG platform were therefore essentially selling at the lows.

I have mentioned this many times before but I will say it again, trading is the basic art of buying low and selling high. Just like almost every other business in any industry.

Remember, the main reasoning as to why we use retail trading data as an extra confluence in our technical analysis is because 90% of retail traders lose money. Therefore, more often than not, it is beneficial to pay attention to what they are doing and go the opposite way.

US Oil 4 hour timeframe chart
(As at 26/11/19)

The chart above shows the current price chart of US crude oil. As you can see, price reversed and those 62% of retail traders holding short positions would have been squeezed out of their trades or be in some considerable drawdown right about now.

The bullish trendline held strong once more and the higher low was formed. Price has now made a higher high and is back above the 4hr 50 EMA. I am looking to trade the price of oil up to $60 / $60.80 per barrel.

You can find my previous technical analysis on the US crude oil commodity markets by clicking on the links below.

https://diaryofafinancekid.com/2019/11/07/us-oil-commodity-market-update/

https://diaryofafinancekid.com/2019/11/20/commodity-market-update-us-oil/

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

https://tradingview.go2cloud.org/SH3bP

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

https://www.icmarkets.com/?camp=38537

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

1 thought on “Using Retail Trading Sentiment Data.

Comments are closed.

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close