Market Sentiment

AAA

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.



INVESTOPEDIA EXPLAINS '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.



RELATED TERMS
  1. Senti-Meter

    A market indicator that represents the inverse of a stock's dividend ...
  2. Socionomics

    The study of the relationship between social mood and social ...
  3. Aspirin Count Theory

    A market theory that states stock prices and aspirin production ...
  4. CNN Effect

    A theory that seeks to explain the effect that 24-hour news networks, ...
  5. Market Psychology

    The overall sentiment or feeling that the market is experiencing ...
  6. Bull

    An investor who thinks the market, a specific security or an ...
RELATED FAQS
  1. What causes a significant move in the stock market?

    There is a nearly infinite number of factors that can cause the stock market to move significantly in one direction or another. ... Read Full Answer >>
  2. What methods can be used to measure and profit from investor sentiment?

    First of all, when people talk about investor sentiment, or market sentiment, they are referring to the aggregate attitude ... Read Full Answer >>
  3. What is the put-call ratio and why should I pay attention to it?

    The put-call ratio is a popular tool specifically designed to help individual investors gauge the overall sentiment (mood) ... Read Full Answer >>
  4. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
  5. How can you avoid the sunk cost trap?

    Avoid the sunk cost trap by recognizing that any investment you've made into a project or decision to date should not be ... Read Full Answer >>
  6. What is the difference between a drawdown magnitude and drawdown duration?

    Drawdown magnitude refers to an amount of money, while drawdown duration is in reference to a period of time. Drawdown is ... Read Full Answer >>
Related Articles
  1. Technical Indicators

    Investors Intelligence Sentiment Index

    This indicator can give a overall sense of bull and bear forces - learn what it is and how it's constructed.
  2. Forex Education

    Tweezers Provide Short-Term Precision For Forex Traders

    Precise and short, the tweezer setup is similar to the more popular double top/bottom formations.
  3. Economics

    How Economic Reality Influences The Market

    The market is confusing enough. But when you consider how economic reality can influence market prices, it's downright baffling.
  4. Active Trading Fundamentals

    How The Power Of The Masses Drives The Market

    Market psychology is an undeniably powerful force. Find out what you can do about it.
  5. Forex Education

    Forex: Gauging Forex Market Sentiment With Open Interest

    Examining open interest on currency futures can help you confirm the strength of a trend in forex market sentiment.
  6. Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  7. Options & Futures

    Market-Based Asset Allocation Lowers Your Risk

    Not all investors are incredibly brave with their money. Thankfully, there are ways to measure your risk level.
  8. Active Trading

    Blending Technical And Fundamental Analysis

    Find out how you can combine the best of both strategies to better understand the markets.
  9. Chart Advisor

    Buying Opportunities on Upside Wedge Breakouts

    Find buying opportunities in these stocks, which have seen their prices break out of long-term declining wedge patterns.
  10. Stock Analysis

    Small-Caps and Dividends: Perfect Together

    For investors, small-caps shouldn’t be just about growth. They can be powerful income tools, as well.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center