How do you use the long/short ratio? Let’s use $BTC as an example: the platform-wide account long/short ratio is 2.18 (68.5% long / 31.5% short) (2.17 one hour ago).
I usually look at it in three steps:
① Check for extremes: the ratio is somewhat extreme right now, and the crowded side often gets flushed out by a sharp wick;
② Check the change: more traders are going long than one hour ago;
③ Check for divergence: the price is down 1.47% over 24 hours, yet more traders are going long as the price falls—beware of a long squeeze.
Sentiment is a lagging indicator, so don’t rely on it too heavily.
#BTC
I usually look at it in three steps:
① Check for extremes: the ratio is somewhat extreme right now, and the crowded side often gets flushed out by a sharp wick;
② Check the change: more traders are going long than one hour ago;
③ Check for divergence: the price is down 1.47% over 24 hours, yet more traders are going long as the price falls—beware of a long squeeze.
Sentiment is a lagging indicator, so don’t rely on it too heavily.
#BTC