Sentiment Indicators: Use of IG Client Sentiment
IG Client Sentiment (IGCS) is unique, proprietary and potentially useful to traders. The article will outline the following illustrative points:
What is IG Client Sentiment (IGCS)?
IG Client Sentiment (IGCS) is a tool that traders can use in connection with a broader technical and / or basic strategy. IGCS incorporates retailer positioning (long and short) to formulate a mood bias. This is represented in percentage form (see image below), which helps traders identify market imbalances that could lead to potential opportunities.
IGCS in EUR / USD:
The mood indicators are few and far between. The two best known are open interest in options, which largely apply to stocks, and the Commitment of Traders Report (CoT). What sets IGCS apart is the large sample size of retailers, which provide more useful data in the form of indicator readings, multiple market datasets (currency, stock commodities) and timely updates for these markets, which are updated several times daily.
IGCS as a leading indicator
The use of IGCS as a technical indicator may allow traders to confirm or deny signals produced by their broader trading strategy. Both basic and other technical techniques are used to measure trends, intervals, potential turns, etc., so incorporating IGCS provides another layer of data to help verify a hypothesis.
IGCS can be considered as one leading indicator as it uses past and present data to project possible future price movements, but since IGCS (retail) only covers one component of the market equation, traders should not rely solely on the IGCS tool for trading decisions. Simply put, retailers only contribute a certain percentage of market input, so of course other factors will have an impact on the respective market.
For example, the EUR / USD chart below shows the projectible nature that can occur with IGCS. The highlights on the chart show an increase in short net positions from retailers, which coincided with an increase in the price action (increase in EUR) on the price chart itself.
IGCS EUR / USD:
IGCS as a technical indicator: Summary
We have shown how sentiment / IGCS can be one unique, proprietary and potentially useful addition to a traders’ approach. In subsequent IGCS articles in this market sentiment sub-modulewe will review the implementation and flexibility of this tool under different trading conditions.