We can analyze financial markets in three different, yet complementary, ways: fundamental, technical, and sentimental. The sentimental analysis gives you a picture of the overall feeling of traders when an event takes place in the financial market. Being able to have a good sentimental analysis of the market is very helpful, but very hard. Do you use sentimental analysis?
Apart from Investment Management and Emotion Control, you have to have a good market analysis.
There are 3 types of analysis: fundamental, technical, and sentimental.
The sentimental analysis provides us with a valuable vision that complements fundamental and technical ones.
Sentimental analysis is mainly the study of the psyche and behavior of traders in response to specific events.
It can be conducted using the BitCoin price behavior, daily trade volume, and public polls.
People experience changing emotions, mostly in a pattern called “The Cycle of Market Emotions”.
In this cycle, you go through a complete wave of emotions, from optimism to optimism.
But the peak of this wave has “Maximum Financial Risk” and the trough has the “Maximum Financial Opportunity”.
A useful tool for sentimental analysis is the Fear and Greed Index.
When the index reaches 0, it signals the Fear: People want to sell their assets as fast as possible.
The 100 mark means the Greed is happening: Nobody is going to sell, and many people want to buy.
A veteran experienced trader uses sentimental analysis to predict the supply-demand change quickly.
It could be a good weapon in your arsenal, but not many people possess it.