Market Sentiment

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DEFINITION of 'Market Sentiment'

The overall attitude of investors toward a particular security or larger financial market. Market sentiment is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market. For example, rising prices would indicate a bullish market sentiment, while falling prices would indicate a bearish market sentiment. Market sentiment is also called "investor sentiment" and is not always based on fundamentals.



BREAKING DOWN 'Market Sentiment'

Market sentiment is important to day traders and technical analysts, who use technical indicators to attempt to measure and profit from the short-term price changes often caused by investors' attitudes toward a security. Market sentiment is also important to contrarian investors, who like to trade in the opposite direction of the prevailing sentiment. For example, if everyone is buying, a contrarian would sell.



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