Eagle Trader Market Analysis: How to Predict Market Trends using Situational Analysis

　　Market sentiment is a force that cannot be ignored in trading, and it profoundly affects price fluctuations and traders’ decisions. It is not only an important reference for traders to interpret the market and judge trends, but also a key factor that must be considered when formulating trading strategies. In a complex and changeable market environment, market sentiment is like a mirror, reflecting the psychological state and expectations of traders, thereby guiding the market trend.

　　For this reason, in Eagle
In the Trader trader selection exam, we attach great importance to candidates’ understanding and grasp of market sentiment, because this is one of the important cornerstones for their future trading career to achieve success. So today, we will introduce a trading method based on psychological analysis and market sentiment – the reverse trading method, hoping to help candidates better understand and apply this key factor.

　　Reverse Trading Method

　　Reverse Trading Method is a foreign exchange trading strategy based on theoretical and psychological analysis. The core is to pay close attention to market trends and formulate trading plans that are opposite to general expectations based on the premise that “consistent expectations are often wrong”.

　　Reverse operation in the market

　　When the market shows a clear trend, such as the euro exchange rate continues to rise and accompanied by optimistic reports in the news, reverse traders will not blindly follow the trend. Instead, they will consider closing long positions or shorting the euro based on judgments such as the market has overreacted and the reduction of new capital inflows. This reverse operation is the essence of reverse trading method.

In addition to paying attention to market trends and news reports, reverse traders will also conduct in-depth analysis of position reports. For example, when the net position of GBP/USD reaches its recent maximum and most speculators continue to increase their positions, they will be keenly aware that the market may be close to the top. At this point, they will choose to close long positions or short pounds to avoid potential risks and seek profit opportunities.

　　Perform the opposite of the public

　　Reverse traders believe that the news media often reflects the emotions and attitudes of the majority of the public. When market extremes are gaining widespread attention, it often means that the market has lacked capital to push up or lower prices further. Therefore, they are good at taking advantage of this reversal of market sentiment and capturing opportunities at market turning points.

　　For example, the euro has been rising for a long timeDuring this period, it means that large-scale participants have established positions in the market and bought the euro; at this time, the news media is still describing the bright prospects of the euro, believing that the euro will continue to rise, but the new capital that can be used to buy the euro has dropped significantly, and the momentum that drives the euro price to continue to rise has disappeared. Therefore, the reverse indicator indicates that the price changes in the euro will change towards a bear market. Overall, a reverse trader is going against the public’s practices.

　　To sum up, the reverse trading method is a trading strategy that is brave enough to challenge market routines and is good at capturing market reversal opportunities. It requires traders to have keen market insight, firm reverse thinking and decisive trading decision-making skills. By deeply understanding market sentiment, contrarian traders can find opportunities to make profits in market volatility and thus be able to handle trading.