Thursday, October 15, 2015

RESEARCH: Oanda Vs Alpari Open Ratios

OANDA and Alpari both offer their open position ratios to the public. Basically, you can use this info to gauge retail sentiment before you open a trade (it's generally best to use retail sentiment as a contrarian indicator, since most retail traders lose). 

The open position ratios of both brokers aren't exactly the same. OANDA indicates that it updates its open position ratios every 20 minutes. I assume that Alpari updates its ratios once a day. 

I checked the percentage of long positions open from both brokers, and came up with the following:

Like I said, the open position ratios of both brokers aren't exactly the same.

So which is most reliable? As OANDA says it updates its ratios every 20 minutes, I'm leaning towards OANDA.

However, if you look on Alpari's page, you'll see that it offers the open position ratios of MANY more currency pairs. OANDA only offers ratios on 14 pairs, whereas Alpari offers ratios on 40+ pairs, including exotics. 

If you're only trading majors or popular crosses, then using OANDA is probably your best bet. For everything else, you have no choice but to use Alpari (if anyone knows of any other brokers offering their open position ratios, please let me know).

Having said that, I wouldn't bother using retail sentiment if it's within 5% of 50% (e.g. 52% long, 48% short). 

And it's just my hunch, but retail sentiment for the more exotic currency pairs will probably be less reliable since less traders will trade them. A handful of traders may be enough to shift retail sentiment dramatically. Like I said, just a hunch.

Related posts

The statistical edge of trading against retail sentiment (from June 2014)
The statistical edge of trading against retail sentiment - part 2 (from July 2014)

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