Market morale assessing is necessary for trading plans.
Although many are aware of the indicator of fear and greed, it is often criticized for being a delay index. Instead, the PCR (PCR) ratio provides a comprehensive measure of market morale.
PCR is a strong emotional indicator for traders to assess market optimism or pessimism by analyzing the total PUT options and the total number of calls in circulation on a specific date.
This ratio applies to a variety of assets and time frames. Understanding and benefiting the ratio of landing/calls can provide great strategic advantages for cryptocurrency traders.
Understanding the drop/communication (PCR)
PCR is calculated by dividing the total number of PUT options that are usually traded at the end of each day on the total number of call options.
Selling options are traded based on the expectation that the price of assets will decrease, while call options are traded based on the expectation that the price will rise. Once the PCR calculates, here are the key levels to focus on:
- Attopher than 1: It indicates that higher mode options are purchased, indicating a declining feeling.
- The percentage exceeds 0.70 – 0.80: It is usually considered a landmark.
- The ratio is less than 0.50: It is usually considered upward.
When does the trader use the drop/communication rate?
Traders can use PCR for a variety of strategic purposes:
- Determine the maximum market scoreHIGH PCR is approaching the drop point in the shot, which helps to determine the exhaustion of the sale of its peak.
- ConfirmationThe PCR decrease from an ascending penetration within the trading range, while the rate of height emphasizes a decreased penetration. This helps traders compatible with market momentum.
- Reverse tradingWhen emotions are highly inclined to one party, traders usually work in reverse coefficients. For example, a very low PCR company may determine for 10 days approaching 0.40 fanaticism in the market, indicating that it may be time to enter mode options or short jobs.
- The event siteThe high PCR may indicate conservative positions and protection from the negative side before major events such as financial reports or FOMC meetings, which may predict unexpected positive and mitigating bounces.
The following figure shows the relationship between PCR and price trends.
The main revelation
In its various forms, the rate of decline/calls to merchants provides various advantages in determining the chances of high possibilities, managing the risk of planning, affirming trends, predicting oscillation, and taking advantage of the psychological extremism of the investor.
Although it is a strong independent indicator, it becomes stronger when it is associated with a full trading strategy including the analysis of the open nodes. By understanding PCR and taking advantage of them and open contracts, traders in encrypted currency can get great advantages in moving in volatile and dynamic markets.
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