SSI (Speculative Sentiment Index) is a proprietary tool offered by FXCM to its clients to calculate market sentiment. Once a trader understands how SSI works and how to read the sentiment data, it can then be worked in to any existing trading strategy.
So today we will examine what sentiment is and how you can analyze sentiment through FXCMs SSI data.
Market sentiment in its most basic definition, defines how investors feel about a particular market or financial instrument. As traders, sentiment becomes more positive as general market consensus becomes more positive. Likewise, if market participants begin to have a negative attitude sentiment can become negative.
While sentiment is not unique to the
Now that you are more familiar with sentiment, let's look how we can analyze sentiment in the
FXCM & SSI
SSI is a ratio that gives us a picture of trader sentiment at FXCM. SSI reveals trader positioning by determining if there are more positions net long than short, and if so by how much. Above we can see the current SSI ratios posted on DailyFX.com. If clients are net short a currency pair SSI will be negative, and if clients are net long the number will be positive. As mentioned above, the more extreme the SSI reading becomes, the more credence the information should be given.
Using our example again with the GBPUSD, the last reading on SSI was -8.15. This ratio means that trader's positions are net short at a rate over 8 to 1 when compared to all open buying interest. This can be interpreted again as traders attempting to position themselves for a possible turn in the market. Contrarian investors knowing this can look to open new long GBPUSD positions back in the direction of the prevailing trend.
Changes in SSI
Register HERE to start your