How do you use the long/short ratio? Let’s use $BTC as an example: large traders’ long/short position ratio is 1.55 (60.8% long / 39.3% short), compared with 1.51 an hour ago.
I usually look at it in three steps:
① Check for extremes: It’s already at an extreme level, and the crowded side is often the one that gets shaken out;
② Check the change: More traders are going long than an hour ago;
③ Check for divergence: The price is up 1.13% over 24 hours, with no major divergence for now.
Position indicators should be compared with trading volume; looking at them alone can be misleading.
I usually look at it in three steps:
① Check for extremes: It’s already at an extreme level, and the crowded side is often the one that gets shaken out;
② Check the change: More traders are going long than an hour ago;
③ Check for divergence: The price is up 1.13% over 24 hours, with no major divergence for now.
Position indicators should be compared with trading volume; looking at them alone can be misleading.