Strength and Sentiment Indicators
One of the faults that some traders find with technical indicators is that most of them are based on the same thing – price and various manipulations of prices. However, a few are based on other market data such as how many contracts are being traded, how many contracts are traded at different prices and who is doing the trading.
The strength indicators use precise numbers generated by the amount of activity reported by the exchange, not price, although there is some relationship between activity and price. The sentiment indicators are based on the subjective opinions of traders and their expectations for future price direction reflected by surveys, or by their level of participation in trading activity revealed in exchange and government reports.
Indicators that fall into this category include:
- Volume and Open Interest, which put numbers on the amount of trading taking place.
- On-Balance Volume, which ties volume to various prices.
- Commitments of Traders reports, which provide information about the caliber of traders participating in a market.
- Sentiment indicators, which include private suveys such as Bullish Consensus and the Daily Sentiment Index.
