August 2008
Intermediate to advanced
208 pages
6h 50m
English
book
Sentiment in the Forex Market: Indicators and Strategies to Profit from Crowd Behavior and Market Extremes
by Jamie Saettele
Content preview from Sentiment in the Forex Market: Indicators and Strategies to Profit from Crowd Behavior and Market Extremes
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78 SENTIMENT IN THE FOREX MARKET
FIGURE 5.3 Commercial traders are extremely long JPY at market bottoms
(USDJPY tops) and extremely short JPY at market tops (USDJPY bottoms)
Source: Chart created on TradeStation
R
, the flagship product of TradeStation Tech-
nologies, Inc.
averaging down (selling and/or buying more contracts as price goes against
your position) is that the commercial trader is most bearish at the highest
price. Once price stops rising and begins to decline, the commercial trader
begins to buy futures in order to hedge against a rise in price. The same
process of averaging down occurs again, but this time the trader is buy-
ing as price is falling. The cycle of buying during downtrends and selling
during uptrends is continuous and results in owning the most at the bot-
tom and the least at the top. The hedger is not trying to make a profit from
speculating on the price of the currency but is instead ensuring that price
movements in the currency do not adversely affect the profitability of the
core business, whether that is selling cars, clothes,or whatever.
WATCHING THE SPECULATORS
The hedge funds and individual traders that trade in a large enough
amount are required to report their positions to the CFTC. These are the
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c05 JWBK195-Saettele May 31, 2008 11:54 Printer: Yet
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