Wednesday, June 18, 2014

OANDA's Historical Position Ratios

I found this interesting tool at OANDA - Forex Historical Position Ratios. If you want to see evidence of retail traders mostly losing money, you can see it here.

The graph above shows historical position ratios for the EURJPY over the last year.

As you can see, retail traders stubbornly remained short (over 50% of positions) as the EURJPY rose from 133 to 145 during late 2013 / early 2014. That's alot of bleeding. Once price peaked at 145, retail traders continued to add to their longs, meaning they bought at the peak.  In the last month, as the EURJPY fell, you can see retail long positions continuing to climb while shorts evaporate.

You can get a snapshot of current open positions here. As of this moment:

Retail traders are overwhelming bullish on the EURCHF and silver (XAGUSD). Conversely, they seem very bearish on the GBPUSD. It's possible to use this information as a contrarian indicator. In this case, the institutional money (strong holders) may realise that retail traders (weak holders) are overwhelmingly long on silver, and decide to shake retail longs by driving price down. When retail longs exit their positions by selling, they add even more downward pressure to silver's price. It might be prudent to look for short entries in this case.

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