How do you use the long/short ratio? Let’s use $Lobster as an example: the market-wide account long/short ratio is 2.20 (68.8% long / 31.2% short), down from 2.49 one hour ago.
I usually look at it in three steps:
① Check for extremes: the ratio is already fairly extreme, and the majority side is often the one that gets shaken out;
② Check the change: there are more short positions than there were one hour ago;
③ Check for divergence: the price is down 38.91% over 24 hours, yet longs still outnumber shorts. Watch out for long-position stop-losses.
When looking at sentiment data, the key is to watch which side is overheating.
#Lobster
Stay rational and only trade within your means.
I usually look at it in three steps:
① Check for extremes: the ratio is already fairly extreme, and the majority side is often the one that gets shaken out;
② Check the change: there are more short positions than there were one hour ago;
③ Check for divergence: the price is down 38.91% over 24 hours, yet longs still outnumber shorts. Watch out for long-position stop-losses.
When looking at sentiment data, the key is to watch which side is overheating.
#Lobster
Stay rational and only trade within your means.
