Market Sentiment - The Hidden Tool of Traders That Many People Still Don't Know

Do all traders wonder why sometimes prices surge suddenly for a brief moment, but other times they fall sharply even though the fundamental data remains unchanged? The answer is sentiment — the feelings and mindset of the investor crowd. This is one of the key forces in the market.

Why Sentiment is the Main Factor Traders Must Listen To

Market Sentiment (Market Mood) is not as mysterious as you might think. It is the herd response of investors — fear, hope, determination — all of which indicate the direction of money.

For example, when the stock market drops chaotically, investors flee to safe assets like gold. The price of gold immediately rises, not because gold’s properties have changed, but because investors seek safety. This phenomenon is called sentiment shift — mood changes, and prices follow.

In the Cryptocurrency world, this phenomenon is even more evident. In 2021, as Bitcoin kept rising, money flowed into altcoins due to FOMO (Fear of Missing Out), causing latecomers to lose everything. Sentiment drops in a second, and prices crash.

How Many Ways Are There to Read True Sentiment?

1. VIX - The Fear Index that indicates market status

VIX is like a thermometer for the market. If VIX rises = the market is cold (investors are afraid). If VIX falls = the market is warm (investors are confident).

A rough method is to look at VIX with MA (Moving Average):

• VIX higher = a sign of potential reversal (buy the dip)
• VIX lower = caution, possibly at the peak

2. High-Low Index - Measures market health based on proof of extremes

This tool shows how many stocks hit their 52-week highs vs. lows.

Key points:

• Below 30 = bear market, most stocks hit lows, prices are cheap
• Above 70 = bull market, most stocks hit highs, watch for corrections

3. Bullish Percent Index - The “uptrend” indicator

BPI calculates the percentage of stocks in an uptrend.

• BPI above 80% = overheated bull market, overestimating (beware of correction)
• BPI below 20% = heavy bear market, oversold (may be a buying opportunity)

4. Follow news but don’t believe everything

For example, based on real experience: When Cryptocurrency gets good news (new listing, big partnership), prices surge 100% in one day. Traders call this a FOMO wave. But those who enter at night often end up losing.

Sentiment is reflecting the news itself — not the actual news, but the interpretation of it.

Don’t Let Sentiment Dominate Too Much

Market Sentiment has power, but it’s not the only method. Think about it: if the mood is good but the company can’t produce anything, the price will still crash.

Experienced traders combine sentiment + technical analysis + fundamental analysis — not rely on just one.

Most importantly, sentiment helps you read whether the current price is worth it — whether people are scared or greedy right now. Usually, the best prices are when the market is driven by fear (buy low), not when prices are high due to greed (sell high).

Summary: Sentiment is useful to know, but don’t get overconfident

What is Market Sentiment? It’s the psychology of the herd — millions of traders making decisions simultaneously, causing prices to fluctuate.

Who understands sentiment first? Who benefits first?

But remember: assets without real value, no matter how good the sentiment, will eventually fall. So use sentiment to decide when and at what price — not just what to buy.