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Sentiment analysis is often the least considered if not outright forgot of the different types of market analysis. Perhaps the reason for that is it’s hard to get inside the head of a single trader, let alone millions of them across the world. So gauging sentiment is difficult and often not as precise as technical or fundamental analysis.

However, sentiment moves the market. On a very basic level, whether traders are eager to buy or itching to sell, is what moves prices up and down. In fact, sentiment can be considered one of the characteristics of certain currencies or other assets. For example, safe-haven currencies are popular when market sentiment has shifted to be risk-averse. Gold tends to go down when market sentiment is optimistic.

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Gauging Sentiment

The question then is, how do we measure whether how the market is feeling? Some traders simply go by observing what kind of assets are moving. From that, they get a gener...

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