How do you use the long/short ratio? Let’s use $SOL as an example: the platform-wide account long/short ratio is 3.64 (78.5% long / 21.5% short) (3.64 one hour ago).
I usually look at it in three steps:
① Check for extremes: It’s already quite extreme, and the crowded side is often caught out by a sudden wick;
② Check for changes: It’s basically unchanged from one hour ago;
③ Check for divergence: The price is down 9.01% over 24 hours, but traders are still predominantly long despite the price falling. Watch out for stop-losses on long positions.
Trading based on sentiment makes it easy to chase the highs and sell the lows.
I usually look at it in three steps:
① Check for extremes: It’s already quite extreme, and the crowded side is often caught out by a sudden wick;
② Check for changes: It’s basically unchanged from one hour ago;
③ Check for divergence: The price is down 9.01% over 24 hours, but traders are still predominantly long despite the price falling. Watch out for stop-losses on long positions.
Trading based on sentiment makes it easy to chase the highs and sell the lows.