How you can use forex position ratios to your advantage.
What exactly do forex open position ratios show us about the FX market and how can we apply it to our advantage?
Open Position Ratios show the long/short ratios for the positions in 14 currency pairs.
Forex open positions held for each of the major currency pairs, relative to the total number of positions held for all the major currency pairs. These ratios are great ways to get a grasp which currency pair holds the most liquidity, which currency pair is the most active, and can provide signals of a trend reversal.
- The premise is that when the ratio shows that there are more long trades( typically above 50% ), than short trades, you can begin deciding on a reversal strategy.
- When the ratio shows that there is more short interest , than longs, than that can be a high percentage profit play that you should be buying.
- When actively trading, its important to discern currency pairs that are overbought or oversold- understanding trend reversals is a substantial tool any trader can use to make a profit.
The indicator is more persuasive and useful when it increases above 50% of the long short ratio in any direction.
Forex sentiment indicators can help your trading, especially if you’re a forex swing trader or decided to be a longer-term forex trader. Understanding how the forex position ratio works can yield profitable results for any trader.
What is important to note is that this indicator is an example that a trend will continue or hinder at certain price levels.
What are forex historical position ratios
These indicators look at how a forex pair ratios behaves over historical period of time.
You can use these sentiment indicators to identify entry and exit points, but you can also use the analysis to see how long/short percentage ratios have affected the price over the long term.
Knowing entry and exit criteria is crucial to making profits with forex historical position ratios.
The time frame can be altered. The 1 year time frame is important for swing and longer-term forex traders .
Understanding whether the market is bullish or bearish, and your understanding of market sentiment is what will separate you from other traders. Use every tool that is possible.
Understanding how to react to the crowd is of major importance-whether to move with the trend or against it
Whether you're a trader that moves with the trend, or is a contrarian, take time to evaluate how you can incorporate these indicators into your trading strategy ammunition closet, and you will never be sorry.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.