An NLP technique that determines the sentiment (positive/negative/neutral) expressed in text. In algorithmic trading, sentiment analysis reads news, tweets or analyst reports to gauge market mood. For example, it can flag unusually bullish or bearish media coverage on a currency, which a trading bot might use as a signal. Sentiment signals are treated as features for prediction models or rule triggers. In forex, combining sentiment indicators with price data can help robots anticipate market shifts caused by news or trader psychology, giving them an edge over purely technical strategies.

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