Sentiment indicators can help you find new potential trading opportunities that may not be obvious from only looking at your charts.
Sentiment indicators often work as contrarian signals. For example, if the sentiment is extremely bullish, it could signal that price is about to move lower.
This post looks at precisely what sentiment indicators are and how you can use them in MT4 and MT5 charts.
What are Sentiment Indicators?
The most popular sentiment indicators look at how many traders are long or short. This can work for a range of markets, including Forex, cryptocurrencies, or stocks.
Sentiment indicators are designed to show how other traders are positioned and where they are making their trades. This can help you find potential trades that may not be obvious using different technical analysis or trading indicators.
As mentioned, sentiment indicators are often contrarian. This means that if there are more short positions in the market, the price may be about to move back higher and vice versa.
One of the most popular sentiment indicators is from IG Markets, and you can find it here.
The image below is an example of the IG market sentiment. This chart is created by using actual live positions that retail traders have with IG markets.
How to Use Sentiment Indicators
You can use sentiment indicators in your trading to gauge how bullish or bearish other traders are about a specific market.
Keep in mind; sentiment indicators can be subject to your interpretation. The most popular sentiment indicators are contrarian indicators.
You can take a contrarian view to do the opposite of what the indicator is showing. For example, if you see a significant difference with more long trades, you may start to look for potential short trades.
The best way to do this is often by using your other favorite indicators or chart patterns to confirm potential trade entries or where you could take profit.
Sentiment Indicator for MT4
This market sentiment indicator for MT4 is a tool you can use to gauge what other currency traders are doing.
This indicator is created by using the data from the MYFXbook outlook data feed that has over 100,000 live trading positions.
To accurately use this sentiment indicator in your MT4 charts, you need to connect it to the MYFXBook database.
Once you have set this indicator up, the data will be updated every 60 seconds. You will then be able to see the percentage of traders long or short and volume amounts.
This indicator comes with several settings you can change, and you can also create an alert to your email, phone, or a popup on your charts.
You can get the sentiment indicator for MT4 here.
Sentiment Indicator for MT5
This sentiment indicator for MT5 will show you bullish and bearish indications.
This indicator should take into account any current trends and their strength to accurately assess the market conditions.
You can see an example of this indicator in the chart below.
This is a simple indicator to use, and once you have set it up in your MT5 charts, you will start to see order volume information and the difference in buy and sell orders.
You can get the sentiment indicator for MT5 here.
Sentiment indicators can be convenient when a potential new move higher or lower in the markets is not clear from your technical analysis.
The best way sentiment indicators are often used is by combining them with your other favorite types of analysis of indicators. This can be using indicators such as moving averages, MACD, or Japanese candlesticks.