Sentiment Line Indicator
The Sentiment Line indicator offers the best market trend sentiment analysis solution for MT4 users. Helps in determining trend directions and buy-sell signals
Description
The Sentiment Line is a technical analysis tool developed for the MetaTrader 4 platform. It closely monitors the price volatility, assesses the market sentiment, and forecasts future trend directions.
This indicator gives you an overview of how a group of traders or investors feels about the current market condition of a trading asset. The goal of this indicator is to evaluate the intention of the major market participants for predicting the next possible direction of the price.
From a technical perspective, the sentiment line works on all types of market conditions. During an on-trend market, it spots the pullback areas of the price so that you can rejoin the current price trend. Besides, during a sidelined market, this tool gives you an idea about the possible direction of upcoming price breakouts.
How to do trend analysis using the Sentiment Line indicator
The index value of the Sentiment line is calculated based on the gains and losses of the price over a specified period. The indicator line moves up during a bullish trend and moves down when the trend is bearish. It doesn’t plot a direct buy/sell or trend-reversal signal. But if you closely watch the swinging levels and directions of the indicator curve, you’ll get a clear overview of the bullish/bearish strength behind the current price movement.
According to the above image, the indicator value was gradually increasing following a bullish trend move of EURUSD. We’ve drawn a trendline at the indicator window to show how the indicator reacts before the price initiates a trend-following move.
You’ll notice the indicator line rebounds upwards creating a higher low every time it comes near the trendline area. Even during the retracement periods of the price the sentiment line denied moving below its previous low. It reflects a bullish sentiment behind the overall market condition. Each time the price breaks above its consolidation range, the sentiment line swings upwards indicating a continuation of the current bullish trend.
Conclusion
The market sentiment can be affected by both technical and fundamental factors. It may be sensitive news or a price breakout at the major support/resistance level which could dramatically change the expectation and motive of the major market participants. So, it is always wise to determine how other traders feel about the current market condition before making a trading decision. However, for beginners, it’s hard to bring both technical and fundamental factors together for predicting an upcoming price movement. In this regard, the Sentiment Line indicator makes it much easier to examine the balance between the bullish and bearish force behind the price.