How do you use the long/short ratio? Here’s an example using $ETH : the overall account long/short ratio is 3.61 (78.3% long / 21.7% short) (3.64 one hour ago).
I usually look at it in three steps:
① Check for extremes: it’s already skewed toward an extreme, and the crowded side is more vulnerable to being wiped out by a wick;
② Check the change: short positions have increased compared with one hour ago;
③ Check for divergence: the price is down 1.9% over 24h, yet longs still outnumber shorts as the price falls—watch for long-position stop-losses.
Readings that stay heavily skewed in one direction are far more useful than a single day’s figures.
I usually look at it in three steps:
① Check for extremes: it’s already skewed toward an extreme, and the crowded side is more vulnerable to being wiped out by a wick;
② Check the change: short positions have increased compared with one hour ago;
③ Check for divergence: the price is down 1.9% over 24h, yet longs still outnumber shorts as the price falls—watch for long-position stop-losses.
Readings that stay heavily skewed in one direction are far more useful than a single day’s figures.