News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Bullish
Wall Street
Bearish
Gold
Bearish
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • The DXY continues to build on a rebound off long-term uptrend support and the Majors are poised for some decent moves this week. Get your #DXY market update from @MBForex here: https://t.co/bjbs0gYT6I https://t.co/0OapScLca9
  • Indices Update: As of 16:00, these are your best and worst performers based on the London trading schedule: France 40: 0.50% Germany 30: 0.49% FTSE 100: 0.32% US 500: -2.12% Wall Street: -2.95% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/nultu65SC6
  • UK PM Johnson is to announce a 10pm closing time for pubs tomorrow, according to the Sun
  • NI First Minister says local COVID 19 restrictions currently in place will apply to the whole of Northern Ireland from Tuesday
  • Heads Up:🇺🇸 Fed Brainard Speech due at 16:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-09-21
  • Technical Trade Levels: #Dollar, #Euro, #Sterling, #Yen, #Loonie & #Gold - Webinar Archive - https://t.co/4s1mlKp2rr
  • that rebuffing in $GBPUSD last week was Wed-Friday as price action built in an evening star formation. Next big support on my chart ~2644-2674 https://t.co/v7yvMVokmn https://t.co/a4uVJj9rY6
  • oy what a start to the week for cable. $GBPUSD right back down to support. soundly rebuffed at 1.3000 resistance last week https://t.co/3dBodYYIwT https://t.co/KEoi6Vjb04
  • @JohnKicklighter https://t.co/EaGYJacfXL
  • Looks like markets have a 'case of the Septembers' today. I think there is more than seasonality at work for $SPX/$VIX but it certainly adds to the environment https://t.co/VX29tT1UfL
Trading Lesson of 2015: Be Mindful of Sentiment Extremes...Always!

Trading Lesson of 2015: Be Mindful of Sentiment Extremes...Always!

2015-12-17 22:00:00
Tyler Yell, CMT, Currency Strategist
Share:

Sentiment could be called the white magic of the FX market. Sentiment about a market is what often carries markets beyond what many expect when a move develops, and the unwind of sentiment is what causes the most shocking moves. Getting ‘blown out of the water,’ is the terminology often used when a sentiment extreme reverses. A great example would be in March and December of 2015 around the EUR. In March, EURUSD was coming down from nearly 1.40 in summer of 2014 and was trading fast below 1.10, and many believed we were on our way to 1.00 or parity. In December, USD was strengthening in anticipation of a Fed rate hike and further easing from the European Central Bank was pulling EURUSD down from the Black Monday high of 1.1712 back toward what many perceived to be parity.

The Euro moved aggressively higher after the ECB cut its deposit rate on December 3. Why? Looking at positioning data in Futures & FX, we notedthat the trade was very crowded and the bar for the ECB to please EUR sellers and encourage more to jump in was too high. This abrupt move was a great example of sentiment getting ahead of reality. The probable is that when reality loses momentum in the direction that sentiment was directionally-biased, sharp moves against the prior trend can develop. Put another (and more succinct way), Jeremy Grantham noted within days of the 2009 equity market bottom, “Be aware that the market does not turn when it sees the light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.”

I will leave you with this quote to remind you not to get down on yourself if you have found yourself on the wrong side of a sentiment unwind. If the father of calculus and the gravitational theory were unable to understand the sentiment drivers in markets, you should not be too hard on yourself.

"I can calculate the movement of stars, but not the madness of men,"

IsaacNewton apparently said after he lost his fortune investing in the South Sea Stock Bubble of 1720.

As a warning of note, Oil is sitting at extremes, which aligns with other markets that had an aggressive recovery. Trying to time precisely the recovery or turn is nearly impossible and left to the likes of Kristian Kerr. However, when the move occurs after such a strong build in positions, the snap back is often faster and stronger than many expect as another “sure thing” unwinds.

See the next Top Trading Lesson of 2015: Stick with the Plan

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES