Basics

Sentiment Analysis: What does it mean?


Financial markets are driven by financial and economic results, and the expectations that human investors and computer-driven trading systems have about future market conditions.

Whether it comes to fundamental or technical analysis, sentiment is a way to gauge the expectation of market participants.

Some investors might be expecting one outcome for a given investment product, whereas other investors might have the opposite view about the same asset.

Just like with the game of poker, if you do not have the right cards in your hand, you still can win by bluffing. The ability to win by bluffing is because there are emotions between the players, including fear, greed and the willingness or unwillingness to take risk.

While bluffing will not help you as an investor, knowing the emotions that market participants may be experiencing can help you better understand market sentiment analysis.

Starting to study Sentiment Analysis

In the forex market we have a similar phenomenon, where the market sentiments of investors can contain information relevant to the decision-making process for new investments or to manage existing positions.

Because the forex market is decentralized, the information related to trading orders and trading volume is scattered across venues and any sentiment indicators or information will be limited to those particular trading venues.

In other words, your broker might show you market sentiment data for their particular clients but that will not necessarily reflect the sentiment of the broader market, as it just represents that specific broker’s clients.

Because of the size of the forex market, it is nearly impossible for any single trader or entity to manipulate the behavior of millions of trades in one direction, with the exception of a few larger banks or institutions such as central banks.

Nonetheless, the actions of many small traders can add up to have a subtle effect on the market which can gain momentum and have a ripple effect, which can build into a breakout such as when the price can suddenly spike.

In other words, the sudden market movements are not always due to a single large order but can be a result of many small orders increasing in frequency and size until the pressure reaches a tipping point.

On the other hand, a “short squeeze” is where a lot of traders (or one big trader) try to reverse their short positions buy going long and causing the market to reverse quickly. It’s an easy way for retail traders who are the herd following the momentum to quickly see loses.

Financial market analyst often share their opinions and inform the market news outlets about their own view, which contributes towards the potential market sentiments.

There are also more broad surveys done systematically which can provide better accuracy of the actual market consensus, compared to one analyst.

The major countries represented by forex pairs have a regular schedule of publishing economic reports about their economy and consumer sentiment data. Such reports help provide certainty to consumers and avoids perturbing the market with surprising news.

The analysis of those information reports is called sentiment analysis. To do it properly, you must follow the principal market influencers, such as economic authorities and major trade unions and sector representatives.

Among the different strategies, such as fundamental and technical analysis, using sentiment data can be a more risky strategy and sometimes is borderline like pure guesswork.

Sentiment Analysis can be useful to complement other strategies and in some cases to serve as a counter-fact. Wiseinvest monitors various data points for sentiment information present in financial markets.

Unlike sentiment analysis, our Wise automated AI trading and AI forex signals subscription-based product is based on actual price data which is more reliable than pure guessing about how traders will behave in markets such as forex. We believe that is why our results are more consistent year-over-year.

Do not believe in anyone who promises your investment profits or guaranteed trading results! There are no shortcuts to making money, it requires hard work and the right education, and information, which is the best way to increase your capital.

Wiseinvest has a strong risk management system to help minimize your losses.

We believe that Wiseinvest AI trading system is better than just reading newspapers and hoping to know what is going to change the market mood. You only need to be vigilant of your email inbox to seize what we believe are the best forex market opportunities, driven by our Artificial Intelligence (AI) engine.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

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Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account and you can monitor the AI trading performance directly on our dashboard.

2. Manually with AI forex signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI forex signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

  1. Subscribe to a Wise-Plan.
  2. Open a Brokerage account. Check this article about the best forex Brokers.
  3. Set an amount and a position size on your Wiseinvest dashboard.
  4. Copy the signals that we will send to you via email and paste you’re your Brokerage account.

The forex signals are sent every time that our trading system powered by Artificial Intelligence (AI forex system) identifies a new trading opportunity.

When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.

Takeaways

  • Sentimental Analysis is based on reports, communication and other subjective observations.
  • This kind of analyses is riskier than fundamental or technical analysis.
  • Sentiments are also ethereal data and can be susceptible to very quick changes as new information arises.
  • Sentiment data can be used to complement other forms of analysis, such as with Wise automated AI trading and AI forex signals.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.