#ActiveUserImpact Market Sentiment in the financial world can be defined as an insight tool that reflects the overall investors' and traders' bias towards a specific instrument or sometimes the overall market conditions. There are many sentiment indicators out there, some of which aim to provide a percentage of how traders feel about a certain market while others aim to provide a percentage for longs vs shorts through the available open positions/orders for a specific market. In some cases, certain instrument prices may be considered a gauge for market sentiment such as the well-known VIX index or certain commodity prices.

For many reasons and depending on which indicator, sentiment cannot provide an exact value, however the history of percentages changes helps identifying specific and critical levels, and in some cases major turning points. Let’s not forget that trader sentiment plays a role in driving prices, the more investors with positive expectations on a specific instrument the higher we can expect the price to be, a positive sentiment for a company may push its share price above its actual valuation.