Waves of optimism or pessimism often prevail in financial markets. They last days, weeks, sometimes months. These trends can be triggered by a variety of factors – macroeconomic, political, commercial, military and others.

We remember a well-known example of market sentiment from the US-China trade negotiations. Even a positive tweet from President D. Trump, led to a rise in risk appetite.

The effects on the British pound before and after the Brexit referendum were negative.

It can be said that sentiment is the emotional side of fundamental events.

Optimism or pessimism leads to investment decisions by market participants. The data from these trades themselves carry information. Various indicators and metrics quantify trading activity. These include trading volumes, open interest in futures, etc.

For many trading strategies, determining sentiment is key. In some cases, it is a primary trading signal. More often, it is perceived as the framework in tune with which to implement investment decision.

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