IG Client Sentiment : are shorts really this many ?

[smcoder]

Hi,

I was evaluating the IG (DailyFX) Client Sentiment report at the following link

h**ps://www.dailyfx.com/sentiment-report

and looking at "Wall Street" (DJ30) h**ps://www.dailyfx.com/dow-jones and at "US 500" (SP500) h**ps://www.dailyfx.com/sp-500 I was wondering are shorts really this many? Apart the fact that I believe shorting is not even possible on all securities, I've always thought that shorts almost never go beyond a single percent digit.

Are these numbers realistic ?


Thanks
sm

 

[tomorton]

Sentiment indicators generally show the sentiment of clients with an open position. There's no limit on the percentage of clients who have a bullish / bearish position. Of course you don't know whether that's 1000 clients with huge money behind them or 3 guys with 50 quid each.

 

[_eug_]

I wondered about this as well. Also how does it know if its day trades vs actual positions.

 

[smcoder]

Sentiment indicators generally show the sentiment of clients with an open position. There's no limit on the percentage of clients who have a bullish / bearish position. Of course you don't know whether that's 1000 clients with huge money behind them or 3 guys with 50 quid each.

I understand now my fundamental misunderstanding, this report is just giving numbers on their own retail traders while I was thinking this was giving markets level snapshots of longs vs shorts. Thank you for providing the hint I needed to understand it.


Thanks
sm

 

[tomorton]

I understand now my fundamental misunderstanding, this report is just giving numbers on their own retail traders while I was thinking this was giving markets level snapshots of longs vs shorts. Thank you for providing the hint I needed to understand it.


Thanks
sm

No worries. Of course, bear in mind that at any one time about 75% of active private retail traders are losing money.

 

[padutrader]

75% of active private retail traders are losing money.

i wonder about this.....I do not think it is so.....more likely that 75% of new traders get wiped out in the first year.

it has been reported that 90% of all businesses fail in the first year.

so that would be likely true of traders also.

also while there is an official period of education for all professional courses like doctors ,chartered accountants, engineers etc there is none for traders and investors.

this is unrealistic and you can put the training period for traders at 7-12 years depending on the expertise a trader would like to acquire

 

[tomorton]

i wonder about this.....I do not think it is so.....more likely that 75% of new traders get wiped out in the first year.

it has been reported that 90% of all businesses fail in the first year.

so that would be likely true of traders also.

also while there is an official period of education for all professional courses like doctors ,chartered accountants, engineers etc there is none for traders and investors.

this is unrealistic and you can put the training period for traders at 7-12 years depending on the expertise a trader would like to acquire

EU and UK brokers are obliged by the regulator to show their winning/losing client percentages. I draw the figure from these declarations. The figure fluctuates a bit as you might expect but I've never seen a UK/EU broker declare a losing figure lower than 70%.

Naturally, if you look at historic percentages of losing traders, including those who are no longer clients or no longer active, the figure will be higher.

 

[padutrader]

EU and UK brokers are obliged by the regulator to show their winning/losing client percentages. I draw the figure from these declarations. The figure fluctuates a bit as you might expect but I've never seen a UK/EU broker declare a losing figure lower than 70%.

Naturally, if you look at historic percentages of losing traders, including those who are no longer clients or no longer active, the figure will be higher.

this figure is hardly surprising considering that there is no mandatory statutory period of training to be called a trader.

to be called a doctor requires a long and mandatory training.

this figure is not reflective of the difficulty of trading

only that inept untrained persons are allowed to be called traders

 

[dozu888]

i wonder about this.....I do not think it is so.....more likely that 75% of new traders get wiped out in the first year.

it has been reported that 90% of all businesses fail in the first year.

so that would be likely true of traders also.

also while there is an official period of education for all professional courses like doctors ,chartered accountants, engineers etc there is none for traders and investors.

this is unrealistic and you can put the training period for traders at 7-12 years depending on the expertise a trader would like to acquire

the correct figure is about 1/3, not 90%.

but regardless, most start ups have positive expectancy, services or goods etc, so should have higher rate of success than trading.

 

[dozu888]

Hi,

I was evaluating the IG (DailyFX) Client Sentiment report at the following link

h**ps://www.dailyfx.com/sentiment-report

and looking at "Wall Street" (DJ30) h**ps://www.dailyfx.com/dow-jones and at "US 500" (SP500) h**ps://www.dailyfx.com/sp-500 I was wondering are shorts really this many? Apart the fact that I believe shorting is not even possible on all securities, I've always thought that shorts almost never go beyond a single percent digit.

Are these numbers realistic ?


Thanks
sm

I can provide the official answer to this because nobody tracks this longer than I do. a few things.

- yes retail IS this stupid. they have been fighting the trend since early 2016 when I started tracking.

- the make up of the long/short sides shouldn't matter much... not long ago they started publishing 'wall street', which is the dow futures I believe, and there is usually not that much difference between the dow and the sp500.

- this is a KEY point.. the neutral point is skewed towards the short side, say about 35:65 ish. considering the fact that if everything else being equal, and the index usually drops 3X faster than it rises, a short position has a bigger reward/risk ratio. hence it is understandable that there are more shorts.

- there can also be herd mentality in a specific trading house as these people may communicate each other, or follow somebody who is perceived to be a good trader. I have observed this in some other places, where someone who has a reputation can attract a lot of newbies to follow, while himself may not be a good trader at all.

- this ratio is fairly helpful but you should also consider other things like AAII weekly and compare to the historicals. plus monitor what narratives are being pushed in the media, you should get a fairly good sense of what's going on.

- and even if you trade long term like I do, review at EoD the intra-day price action. there is no need to go into the nitty gritty, if buying/selling pressure is very high they will flash right in front of your eyes.

- again, trading is unfolding stories. you can have several hypothesis to start with, but after analyzing the inputs above for a few weeks/months, the picture will become quite clear which hypothesis is the most likely, then you will know what to do. very very similar to poker, from the flop to the turn to the river with every round of betting you reach the final conclusion. I'd recommend you watch a lot of poker tournaments, time well spent to get your sense up on how to unfold stories.

for examples of how killings can be made using this method, check my 'trading is easy' thread.