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smart money...
- Thread starter dgmodel
- Start date
There was a Barron's article in late Jan. or early Feb listing the best performers of 2002. I know Sprott was #1, but many equities funds with small options/futures activity like to classify themselves as CTA's (not hedge funds) to fall under CFTC instead of brain-dead SEC regulation.
If you want to read this article badly enough, I'm sure you'll find it...
If you want to read this article badly enough, I'm sure you'll find it...
In our method of reading it's irrelevant who exactly represents smart money and dumb money. The same player or group of players for many different (and irrelevant) reasons could act on the right or wrong side. What really matters is: smart money (whoever represents them) leave certain footprints that differ from those of the crowd.
In general smart money's action is:
1. Slow, careful, coordinated on the beginning stage of the movement (trend beginning). Price moves up slowly, volume is stable as smart money tries not to attract attention.
2. More obvious but still quite careful on the next stage (trend continuation). Price moves up sharper, volume is on steady rise, smart money tries to accumulate last portions of shares, sometimes switching sides to limit the movement, shake out unwanted fellow travellers.
3. Switches to the opposite side to liquidate position into last stage of the move (euphoria or capitulation). Price moves vertically, volume is exploding.
On the opposite side, crowd:
1. Entirely (or almost) misses first stage.
2. Partially notices the move on its second stage, tries to participate to certain degree
3. Goes in with full force on the thrid stage not being able to endure the pain of missed movement, making the move hysterical - and remains holding the bag as smart money unloads earlier accumulated position into their hands and there are no more potential buyers.
This is simplified somewhat scheme, real life offers more complicated scenarios and their combinations. But this is the foundations of the method of reading.
Vad
In general smart money's action is:
1. Slow, careful, coordinated on the beginning stage of the movement (trend beginning). Price moves up slowly, volume is stable as smart money tries not to attract attention.
2. More obvious but still quite careful on the next stage (trend continuation). Price moves up sharper, volume is on steady rise, smart money tries to accumulate last portions of shares, sometimes switching sides to limit the movement, shake out unwanted fellow travellers.
3. Switches to the opposite side to liquidate position into last stage of the move (euphoria or capitulation). Price moves vertically, volume is exploding.
On the opposite side, crowd:
1. Entirely (or almost) misses first stage.
2. Partially notices the move on its second stage, tries to participate to certain degree
3. Goes in with full force on the thrid stage not being able to endure the pain of missed movement, making the move hysterical - and remains holding the bag as smart money unloads earlier accumulated position into their hands and there are no more potential buyers.
This is simplified somewhat scheme, real life offers more complicated scenarios and their combinations. But this is the foundations of the method of reading.
Vad
Commitments of Traders
http://www.marketpit.com/S&P500.htm
http://www.marketpit.com/S&P500.htm
Quote from dgmodel:
so how do you know whos who???
Quote from Threei:
In our method of reading it's irrelevant who exactly represents smart money and dumb money. The same player or group of players for many different (and irrelevant) reasons could act on the right or wrong side. What really matters is: smart money (whoever represents them) leave certain footprints that differ from those of the crowd.
In general smart money's action is:
1. Slow, careful, coordinated on the beginning stage of the movement (trend beginning). Price moves up slowly, volume is stable as smart money tries not to attract attention.
2. More obvious but still quite careful on the next stage (trend continuation). Price moves up sharper, volume is on steady rise, smart money tries to accumulate last portions of shares, sometimes switching sides to limit the movement, shake out unwanted fellow travellers.
3. Switches to the opposite side to liquidate position into last stage of the move (euphoria or capitulation). Price moves vertically, volume is exploding.
On the opposite side, crowd:
1. Entirely (or almost) misses first stage.
2. Partially notices the move on its second stage, tries to participate to certain degree
3. Goes in with full force on the thrid stage not being able to endure the pain of missed movement, making the move hysterical - and remains holding the bag as smart money unloads earlier accumulated position into their hands and there are no more potential buyers.
This is simplified somewhat scheme, real life offers more complicated scenarios and their combinations. But this is the foundations of the method of reading.
Vad
very well put...
all i have to say is wow, that is an amazing chart. basically its saying we're gonna have a serious change of direction soon, with the divergence we're seeing right now.
great link!!!