Crowd sentiment
There are many ways to measure the sentiment of the majority of investors; whether they are bullish or bearish on a market. Crowd sentiment is a little tricky, you can't use it like your ordinary technical indicators. The idea is that when everyone is bearish and there are no more sellers left, that's when major bottoms occur. The same is true on the long side, when there are no buyers left, that's when major tops occur.
Think about this, if all investors knew any better, the crowd sentiment should be the inverse of the price. Right? As the price goes up, there should be less buyers and less people bullish on it. As the prices goes down, there should be less sellers and more people bullish on it.
The reality is that, it's quite the complete opposite. First of all, your average investors aren't well informed. There's no way of predicting exactly when the market is going to go up or down. Because of this, people will try to chase the market no matter what stage the market is in. The retail investors are always behind the curve. Look at the NDR Crowd Sentiment below. Notice how at every major bottom, the sentiment was at extreme lows.There aren't many reliable sentiment indicators out there, and if there are, the volatility of the sentiment indicators is just too crazy to be used as a trade signal. People emotions are more volatile than the price. However, knowing the crowd sentiment could come in handy to spot major turning points in the market. Check out other ways to find out market tops and bottoms.
Think about this, if all investors knew any better, the crowd sentiment should be the inverse of the price. Right? As the price goes up, there should be less buyers and less people bullish on it. As the prices goes down, there should be less sellers and more people bullish on it.
The reality is that, it's quite the complete opposite. First of all, your average investors aren't well informed. There's no way of predicting exactly when the market is going to go up or down. Because of this, people will try to chase the market no matter what stage the market is in. The retail investors are always behind the curve. Look at the NDR Crowd Sentiment below. Notice how at every major bottom, the sentiment was at extreme lows.There aren't many reliable sentiment indicators out there, and if there are, the volatility of the sentiment indicators is just too crazy to be used as a trade signal. People emotions are more volatile than the price. However, knowing the crowd sentiment could come in handy to spot major turning points in the market. Check out other ways to find out market tops and bottoms.