A Closer Look at Sentiment in the Markets

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Many people would argue that the entire financial industry is built on a system which hands the advantage to those who already have it while further shutting out those who don’t have access to any meaningful amount of capital, which I’d guess is true enough, but then again I’m also just part of the game which we’re all forced to play. It’s sink or swim for me too and I choose to swim!

However, as is attested to by the mere existence of my blog, I am more than happy to share my tools of success, this time aimed at the trading industry which is perhaps a more targeted form of the identified unfairness of the system of rewarding the haves with more and taking away what little the have-nots have.

So if you have any interest in trading then you will definitely know quite a bit about the different approaches, one of which is technical trading, often compared to trading on market sentiment, mostly because these two are often seen to be on opposing sides. That’s not entirely the case though, because when we speak about sentiment in the trading world we’re not talking about emotion in the regular sense. We’re not talking about strong feelings you would have to a selection of certain stocks and we’re definitely not referring to your own feelings about the events which could affect the movement of the shares.

Market sentiment is not about how you feel, but rather about how traders all over the world who are trading the same stocks, shares, etc, feel about where they think the value of the shares is going to move to. That’s often where a lot of confusion arises, causing somewhat of a negative attitude towards those traders who take the sentiment-approach over something like technical trading.

So let’s walk through an example of how sentiment affects the markets, or rather what sentiment actually is in lieu of the financial markets. Any trader or broker who knows exactly what they’re talking about will tell you that the entire trading industry is built on sentiment – sentiment is what drives the prices of shares because it is indeed sentiment which dictates to traders to buy or sell shares and subsequently causees the shift in their value, one way or the other.

So let’s consider the example of a trader having targeted the retail industry as one from which they will buy and sell their shares, according to sentiment. If for example there is a sudden spike in the visits to the offices of the best truck accident attorney in Newton County, “regular” sentiment would exist in the form of people being concerned about the suggested spike in the number of accidents as well as the subsequent legal proceedings which would have some truckers needing legal representation, while sentiment as it applies to the trading world takes the form of how traders feel this spike in trucking accidents will affect the price of the shares which trade in and around the logistics part of the retail supply chain.