Sentiment analysis refers to the study of how emotions and expectations influence financial markets.
Sentiment often drives short-term market moves.
Sentiment indicators aid in contextualizing prices by determining the state of the market at any particular time.
Tracking sentiment gives traders a forward-looking perspective of the market instead of relying on historical data, which tends to result in hindsight bias.
Traders will use sentiment indicators to figure out the direction of a trade, and then they will use technical indicators or price action to figure out when to enter and exit a trade.