October 2019
Beginner
384 pages
10h 46m
English
Content preview from Technical Analysis For Dummies, 4th Edition
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
Start your free trial


Chapter 3
Trade What You See: Market Sentiment
IN THIS CHAPTER
Looking into market sentiment
Turning up the volume
Understanding personal sentiment
Using probability to overcome cognitive bias
Your goal as a technical trader is to identify what the crowd is doing and take advantage of it — without falling prey to the market’s emotions. The primary technical tools for identifying sentiment are patterns and indicators, and the discussion of these tools forms the core of technical analysis (and this book). However, you have two other methods of measuring sentiment:
- Sentiment indicators describe the market as a whole.
- Volume directly represents the extent of trader participation. Volume is a powerful indicator in its own right and adds confirmation to price indicators.
Sentiment and volume indicators operate on the principle that “The trend is your friend — until the end,” meaning that the crowd is wrong at price extremes and simply clueless when markets are nontrending. Sentiment ...