Charles K13_ Perez#64

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What is sentiment analysis in forex?

Sentiment analysis measures the overall mood of traders or investors toward a currency. Tools include Commitment of Traders (COT) reports, retail sentiment indexes, and social media data. For example, if 80% of retail traders are long EUR/USD, contrarian traders may see this as a bearish signal. Sentiment adds another layer to fundamental and technical analysis, helping traders avoid crowded trades. However, sentiment should not be used alone, as it often lags price action. Combining it with price structure and news context improves accuracy.