How do you use the long/short ratio? Let’s take $BTC as an example: the large-trader position ratio is 2.34 (70% long / 30% short) (2.35 one hour ago).
I usually look at it in three steps:
① Check for extremes: it’s already skewed, and the crowded side is more vulnerable to a reversal and getting squeezed;
② Check the change: there are more shorts than one hour ago;
③ Check for divergence: the price is down 0.59% over 24h, but there are still more longs despite the price falling—beware of a long-side liquidation cascade.
A one-sided market doesn’t mean an immediate reversal, but it does mean positioning is getting more crowded.
NFA, DYOR.
I usually look at it in three steps:
① Check for extremes: it’s already skewed, and the crowded side is more vulnerable to a reversal and getting squeezed;
② Check the change: there are more shorts than one hour ago;
③ Check for divergence: the price is down 0.59% over 24h, but there are still more longs despite the price falling—beware of a long-side liquidation cascade.
A one-sided market doesn’t mean an immediate reversal, but it does mean positioning is getting more crowded.
NFA, DYOR.