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An important aspect of any profitable approach for trading foreign exchange is having an understanding of the impact that sentiment has on the values of currency pairs.
If you are able to understand these sentiments through the quantified tools and resources that are available to forex traders, then you will be able leverage this sentiment in a timely manner in order to predict price movements and profit opportunities. This will allow you to make more effective trades overall.
If you want to be a successful forex trader, your trading approach should not rely solely on economic calendars and technical indicators to detect trading opportunities as they emerge. You need to be able to anticipate when profitable trading chances will arise.
In this article, we explore how traders can take better advantage of currency pair sentiment in order to execute successful trades using the wealth of tools and indicators provided to them by leading brokers like Khwezi Trade.
The role of currency pair sentiment
The term “currency pair sentiment” refers to the general feelings that forex traders have regarding a particular currency pair.
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These attitudes are frequently gleaned from the trading activity that takes place on a particular platform, such as that offered by Khwezi Trade.
Traders may get more optimistic and drive that general attitude higher when they become more encouraged about the future price movement of a currency pair, particularly in reference to its current price. This can push the price of the currency pair higher.
In the same way that traders can develop bullish or bearish attitudes regarding the foreign exchange market as a whole, traders can also develop bullish or bearish attitudes regarding the valuations and price movements of particular currency pairings.
Tools for analysing currency pair sentiment
Traders can make use certain tools in order to better comprehend the general feelings that traders have for a particular currency pair. The following is a list of important data points and categories to think about when you evaluate those feelings and look for potentially lucrative business prospects.
Pivot Points
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When trading foreign exchange, pivot points are used to determine potential price levels and positions at which the prices of a currency pair may shift direction.
These pivot points also correspond to shifts in market attitude, particularly when that sentiment is informed by lines of resistance and support, as well as other trends based on momentum and other factors that shape price behaviour.
Support and resistance levels
Traders consider price levels to be lines of support and resistance when they predict that the price movement of a currency pair will slow down and possibly reverse direction at certain levels.
Existing chart activity, such as range-bound price movements, and/or Fibonacci levels may serve as a source of information for these lines of support and resistance. Alternatively, these lines may be informed by both sources.
Sentiment reports
Some forex brokers issue reports on market sentiment. For example, using Khwezi Trade’s Flexi Analysis area traders are able to swiftly obtain a sense of the overall feelings towards currency pair trading with regular updates on the proportions of long and short positions.
