In this Wiki we will be exploring Sentiment Trading Tools and Routines and how you might go about applying them to your trading.

This Wiki is part of our Sentiment Analysis Wiki. Be sure to check that out HERE.

Sentiment Trading Tools and Routines

When you are trading on your own there are certain trading tools that you can’t live without no matter where you get them from. We are going to look at these tools along with some ideas for your personal trading routine now.

Sentiment Trading Tools

When it comes to the tools that professional traders use they will pretty much use anything that gives them an informational [Having_an_Edge_in_your_Trading | edge]] over the rest of the market. These are things such as:

Premium news feeds
Terminals such as Bloomberg and Reuters Ikon
Financial TV channels such as CNBC and Bloomberg
Social media outlets such as Twitter

Twitter (now X) is great because it gives you an on the ground pair of eyes all over the world as every major event is taking place. The best people to follow are those people who make it their job to get the breaking news first and tweet it as quickly as possible. We have a Wiki on setting up Twitter_/_Tweetdeck_News_Streaming | Tweetdeck Here that can be helpful in starting to follow financial analysts.

Think of following financial journalists, analysts, and economists from all of the major news wires, particularly the central bank watchers. These watchers will constantly be alerting their readers to the latest information regarding their respective Central banks.

Large firms and investment banks will often post any breaking news relevant to them to their own feeds first. Therefore, social media should be part of your toolkit and although it’s not as powerful as premium news feeds it definitely has its place. Most premium news feeds will monitor important social media outlets and report it to you as well so if you find it hard monitoring everything we have mentioned then just go with a premium news feed that does all the heavy lifting for you. [[Forex#Paid_Resources | Here is a list of news feeds and squawk services to take a look into]]

The whole point of having access to all this information is so that you are constantly tuned into the markets allowing you to make rational, profitable, trading decisions quickly. Your trading desk should be an island of information.

Sentiment Trading Routine

You might be wondering how you can use all these tools effectively so we will now spend some time looking into this in some more detail.

Your trading day begins as you reach your desk. This should be at least an hour before the market kicks off so that you are fully prepared and not behind the curve.

There are certain questions that you should be asking and answering while doing your research:

What was the main sentiment driving the markets in yesterday’s session?
What happened in the most recent overnight session to affect or drive the sentiment?
What is the market doing at the open of the current session?
What have the key data points done in relation to the expectations?
Did they come out better or worse? If so was it by a significant amount?
How does this fit in with the overall fundamental picture for that currency?

For example, if we are buying USD in the long run and we get some CPI data that beats the expectations we know that there is a pretty good chance that this move could drive the price higher through the session and there are some pips to be made. On the other hand, if the CPI came out below expectations there may be a selloff on the dollar. But how long will the selloff really last given the overall positive fundamental picture and the fact that the number wasn’t too much worse than the market expected? There might actually be a good buying opportunity after the market sells the dollar off and they too realize its now at a discount.

This is the type of [[ thought process you need to form into your daily habits as you trade.

The next question is, why would you enter a trade right at this moment? Why not wait an hour or even until tomorrow’s session? If you can wait then surely there is no reason to enter the trade right at this moment. If you feel strongly that everything is lining up right now to push the price in your direction and there is absolutely no reason for it to not move then this is a high conviction trade.

The question is: what is going to make this pair move right now if I enter the trade? The better you get at answering these types of questions the more money you will make. If you cannot answer these questions then the trade is most likely a low conviction trade and you have a greater chance of experiencing drawdowns or losses.

Going back to what we have learned about the basics of Trading psychology, being aware of your state is extremely important to improving your trading performance. Being aware of the market's state is exactly the same as being aware of your own state.

In order to answer all these questions you will need to conduct your analysis and research of the markets.

Top Down Order to Apply the Routine

Your days should start by getting an overview of the markets. The best way to do this is to visit sites from your reading list such as Bloomberg currencies and spend time reading the latest articles relating to the major Central banks and currencies that you are trading. Most of this information can be found in the live news feeds as well. This helps you get a sense of what is happening in the markets so that you reinforce the bigger picture in your mind.

Once you have refreshed yourself the next step is to figure out what has been moving the markets recently. The best way to do this is to read the research prepared by the analysts from the news feed. Look for some kind of pre-session report or daily forecast. The purpose of this type of analysis is to tell you what was moving the markets in the previous session which will usually be overnight while you were sleeping. These reports can help you get tuned back into the markets quickly. You can then use this information to then determine if there is a good trade opportunity based on the prevailing sentiment.

The question you are asking here is: is this information significant enough to attract all of the traders to get into the market as they are getting to their desks when the session opens? If it is then you can drill down, plan your trade in full, and determine entries, exits and stops, and trade management based on the prevailing conditions. If this information is not enough to make other traders jump on board then you can continue scanning the real-time news feeds for anything new.

As you can see, the general idea behind sentiment and day trading is being completely aware of exactly what is going on at any given time. By having this information and knowledge you are in a much better situation to make consistently profitable trading decisions.

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