Trade Against The Retail Herd 16th Feb

What's new today?

Increasing Inflation levels in the UK have led to strength in the GBP with analysts increasing the probability of an interest rate rise later in the year. Retail positioning however is quite contrary to this with increased short positions against the EUR, JPY and USD.

Click image to enlarge

Provided by Pivotfarm via the Technical Analysis blog

Comments

[winks]

There is no "retail herd" investing these days. Why do you keep posting this nonsense?

[falak pema]

If you're not colour blind you can see the red from the green for each pairing.

[zaphod]

So I fully admit it, I have no idea what these charts represent. How does this help you trade against the retail herd?

[Ferg .]

The chart is a percentage representation of retail trader positioning . It's purpose is to offer contrarian trading signals based on the premise that , on the whole , retail traders are usually incorrect in their positioning . For example , the percentage difference between those buying and selling the GBP/USD is 32.09 % , with 33.97 % long and 66.03% short . Using this contrarian approach you'd look buy GBP/USD .

The larger the disparity between longs and shorts the stronger the signal ( although if I remember correctly one of the analysts over at DailyFX , which has its own in house version called the SSI , mentioned that at very large extremes the retail traders are usually correct ) .