Market Sentiment

Gauge whether the market is bullish or bearish using sentiment indicators.

Last reviewed: 2026-03-06

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Overview

Market sentiment reflects the collective mood of traders. Sentiment indicators include COT reports, retail positioning, and options flow. Contrarian traders often fade extreme sentiment.

Market Sentiment SourcesCOT ReportCommitment ofTraders (CFTC)RetailPositioningBroker dataContrarianFade extremesWhen crowdedExtreme positioning often precedes reversals
COT, retail positioning, contrarian

Cot Reports

The Commitment of Traders (COT) report from the CFTC shows positioning by commercials, large speculators, and retail. Extreme net long or short positions can precede reversals.

Retail Positioning

Broker data shows retail trader positioning. When retail is heavily long, contrarians may look for shorts. Retail tends to be wrong at extremes.

Contrarian Trading

Contrarian trading means fading the crowd at extremes. If everyone is long EUR/USD, consider shorts. Works best when sentiment is at historical extremes.

Limitations

Sentiment is a secondary indicator. It can stay extreme for a long time. Use with price action and fundamentals—don't trade on sentiment alone.

Knowledge check

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What is the COT report?

FAQ

Common questions about this topic.

What is the COT report?

The Commitment of Traders report from the CFTC shows how different trader types (commercials, large specs, retail) are positioned in futures. Used to gauge sentiment extremes.

Does contrarian trading always work?

No. Sentiment can stay extreme for extended periods. Use it as one input with price action and fundamentals. Fade only at clear extremes.

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Disclaimer and sources

Educational content only. Not financial advice.

Important disclaimer

Forex trading involves substantial risk of loss. This content is for educational purposes only and is not financial advice.