Traders are often concerned that their ideas might fail simply because they have become "too consensus". That is, if many other participants are positioned in the same idea, the risk/reward may become negatively skewed. There aren't many traders left to move the position further in the desired direction and, should prices start to move the other way, there can be a stampede for the exits quickly putting positions under water.

Sentiment in the stock market is one way of gauging market psychology and whether there may be a bullish or bearish consensus. Unfortunately, the standard measure for assessing sentiment, the put/call ratio, has several weaknesses. First, it often mixes together put and call trading for stock index options and for the options on individual equities. My work shows those are different distributions, with different impacts on markets. The equity-only put/call measure, where options across all exchanges and all listed issues are included, has been the best measure for sentiment. A second problem with the standard put/call ratio is that it is itself impacted by past price movement and volatility. When markets rise, the ratio tends to decline and vice versa.