Sentiment Analysis for Forex
* Sentiment helps decipher traders feelings towards an asset
* SSI shows net positioning on currency pairs
* Changes in sentiment provide insight into trends, and market reversals
SSI (Speculative Sentiment Index) is a proprietary tool to display retail positioning in real-time to display retail-market sentiment. Once a trader understands how SSI works and how to read the sentiment data, it can then be worked in to any existing trading strategy.
So today we will examine what sentiment is and how you can analyze sentiment through SSI data.
Market sentiment in its most basic definition, defines how investors feel about a particular market or financial instrument. As traders, sentiment becomes more positive as general market consensus becomes more positive. Likewise, if market participants begin to have a negative attitude sentiment can become negative.
While sentiment is not unique to the Forex market, it can be directly translated to currency pairs. Contrarian investors will look for crowds to either buy or sell a specific currency pair, while waiting to take a position in the opposite direction of sentiment. The graph above shows sentiment in action. Going back to November of last year sentiment has been negative on the GBPUSD, however prices have continued trending higher. Sentiment has recently become even more extreme as the majority of traders in this case are attempting to pick a top on the GBPUSD.
Now that you are more familiar with sentiment, let’s look how we can analyze sentiment in the Forex market.
SSI is a ratio that gives us a picture of trader sentiment. SSI reveals trader positioning by determining if there are more positions net long than short, and if so by how much. Above we can see the current SSI ratios posted on DailyFX.com.
If clients are net short a currency pair SSI will be negative, and if clients are net long the number will be positive. As mentioned above, the more extreme the SSI reading becomes, the more credence the information should be given.
Using our example again with the GBPUSD, the last reading on SSI was -8.15. This ratio means that trader’s positions are net short at a rate over 8 to 1 when compared to all open buying interest. This can be interpreted again as traders attempting to position themselves for a possible turn in the market. Contrarian investors knowing this can look to open new long GBPUSD positions back in the direction of the prevailing trend.
Changes in SSI
Lastly, traders should also be aware of changes in sentiment. Changes in sentiment can be used to decipher whether trends are set to continue, pause or even reverse. In the event that sentiment is at an extreme, a reduction in net open interest can signal that a trend is winding down. Likewise if a pair with neutral sentiment begins changing rapidly, in one specific direction, this can signal a potential change in market direction.
Friends, the word hedging may have been first heard by many today. Yes, today I will tell you as much as I know about hedging. What is forex hedging? Forex hedging is a tool used to protect traders against losses. Buying a contract means increasing its value and denying the damage caused by another contract. Hedging is only recommended for experienced forex traders. Forex hedging by the company Forex hedging is used by companies to deny forex risk when trading in the Forex market. They follow the rules set by the International Financial Reporting Standards (IFRS) and the generally accepted US Accounting Principles (US GAAP). All Forex hedges of the company are listed on their balance sheet at a fair market price. Direct hedging Direct hedging occurs when a trader opens two trades at the same rate in a pair and at the same lot in a sale. There is no profit for the trader in those trades but the broker is at a loss with spreads, yes the profit will be if the trader has good capital and then the movement of that pair can open some more trades wherever they are and close all the trades together with average profit. This is how many traders hedge. Complex hedging There are several complex ways of hedging. For example, a trader can hedge against a particular currency by using two different currency pairs. For example, a trader can hedge in EUR / GBP pairs by buying / long and trading in GBP / USD on sell / short.Forex options trade is an agreement for the exchange of foreign currency at a specific future price.For example, a trader trades at 1.27 on the EUR/USD pair, and a forex strike option is placed on the broker at 1.26 in the same position for protection. If the EUR / USD pair drops to 1.26 at the specified time, the trader is paid for that option. The amount of this alternative money will depend on the market condition of the trader's trade as well as its lot size.And if the EUR / USD pair does not come to the rate of 1.26 at that particular time, then the trader loses the purchase price of that options trade/option. Other types of hedging Hedging in currency contracts is more tradable and everyone's choice, hedging in products and other types of hedging. Which many of us do not know. The image below shows the hedging cycle: However, many good traders in the world hedge according to their position and scope of capital. Which is not so easy for you and me. If you want to hedge then you must be a skilled and successful trader and you can learn hedging type and hedging from someone then you can get into hedging. Hedging with a little idea is like jumping into a fire on your own. Thanks.
Hello friends, I hope everyone is well. And may you always be well and may your life become more beautiful. So friends, I will discuss one or another topic of Forex every day. Things that you must like. So friends, I want to discuss this today What do we mean by forex? What is forex? Yes friends, the first thing we understand about the Forex market is the Foreign Currency Exchange. This means that you have to buy another currency in exchange for one currency or sell another currency and buy another currency. These tasks could have been done by various big banking institutions before. But now anyone can enter this market and make money transactions. The forex market is similar to the stock market but there is a difference. If you buy shares in the stock market, you have to sell Orissa that will buy those shares. On the other hand, in the Forex market you can buy any type of currency at any time at your convenience and sell. Different types of currencies like Gold Brunch Oil Gas etc. are traded in the Forex market. Besides, cryptocurrency transactions are currently taking place. Many other types of coins are traded, including bitcoins and ethereum coins. The people of the world today are involved in the Forex market. In the forex market, it is always better to market with patience. So friends, I will discuss another topic later today. If you want to know about anything, please comment. All is well Thanks, everyone.
Just like any other country, South Africa hosts its very own financial regulator. However, it can be said that the institution is quite new. It was first established in 1991, which is quite young in terms of financial institution standards. The reason for the establishment was quite natural. The South African economy was on the rise and somebody needed to be present to actually regulate it. This is the case with pretty much every regulator in the world. However, South Africa had another serious goal to achieve. Their financial regulator needed to be a perfect example for other African states. And needless to say, they were able to achieve this goal. We are going to glance over several aspects of this regulator and determine how they were able to set an example. The name of this institution is FSB (Financial Services Board), but now they have changed their name to FSCA (Financial Services Conduct Authority), let’s find out the ins and outs of FSCA and see how they were able to set a standard for other African states. The start of it all As already mentioned the institution was first created in 1991 by the name of FSB, and in some cases, people still refer to it with that name. In all honesty, it is no surprise as the name has been changed for a little less than a year. The need to create such an institution was quite common with other countries as well. The government couldn’t handle to pressure the Ministry of Finance with the task of regulating everyone, therefore they had to make an independent body to do the heavy lifting. But what does the regulator do? Well, pretty much any Financial Service Provider including the best South African Forex brokers listed here are obligated to report and answer to the FSCA’s laws. Also, any company that is considered to be a Insurer, capital market, Investment company or a retirement fund, falls under the direct jurisdiction of the FSCA. Their main obligation is to keep their operations transparent and fair, adhere to the anti-money-laundering laws and pay attention to their customers. This means that the FSCA is sort of like a guarantee to the customers of these companies, that if something were to happen they will back this customer in the dispute to help resolve the issue. Naturally, the institution will not be biased, should the customer-proven wrong, they will impose the proposed fines on them instead of the company. But it needs to be said that the regulator has no limit as to how much fines it can issue for a violation of its laws. The technical aspects One of the best features that the FSCA has is their obligation to provide financial education to the general population. Well, not the whole population, but to the ones that have voiced their interest in investments and financial activities. This means that the resources they feature on their website will be done by the best experts present in the country. This is an amazing addition from a regulator’s side. As of today, no other Financial regulator has this feature, and in all honesty, they can learn from the FSCA. What is the FSCA trying to accomplish with this? Well, first of all, they are trying to filter out the complaints that may be coming their way in the future. If the customer knows what they can dispute and what they can not, it will prevent them from spamming the regulator. This means that the FSCA will be able to maximize its effectiveness, by only working on the most relevant of dispute cases. FX brokers beware As already mentioned. The FSCA is tasked with regulating the Forex brokers currently operating in the country. Pretty much every Forex broker you find in South Africa will happily display their license on their front page, but please make sure to double-check it with the regulator. First, search the license number or name of the company on the FSCA website, and after that, contact the regulator directly to make sure that the license has not been revoked and the regulator hasn’t simply forgotten to remove the company from the list. One thing you will need to know is the collateral damage that can be compensated by the FSCA. This means that if the Forex broker is regulated by the FSCA, but it still turns out to be a scam, the investor will be eligible for a compensation of a specified amount. This is because the regulator is directly responsible for having only trustworthy companies under its jurisdiction. The compensation is basically like an “I’m sorry” from the regulator for not doing their job properly. So far the operations have been smooth, and every FX broker that has an FSCA license has turned out to be legit. What’s so special about the FSCA As already mentioned, the FSCA is quite the industry standard when it comes to financial regulators. They are tasked to filter out the financial companies and only recommend the ones they deem reliable. They also warn the public about potential shady companies and compensate them in case they are mistaken about a specific provider. But, what makes the FSCA so great is their addition of Financial education. Needless to say, no regulator has tried adding this feature to their platform, the FSCA is the first. Thanks to this addition, they have inspired several African states to develop their own Financial regulators by essentially copying FSCA. There is no shame in copying a good Financial regulator, as long as it is safe, nobody will dispute copyright or anything.