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Why
Some People Almost Always Make Money in the Markets
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What you
should know about some closely guarded secrets of the pros !
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Do
you ask yourself sometimes why some people almost always make money in
the markets? The answer is quite simple and you can easily discover the
little-known secrets of the pros to join the winners. The most intelligent
way to approach the markets is to watch what the so called "smart
money" and the so called "dumb money" is doing.
The dumb money, or
the so called "crowd", is getting consistently beaten by the
more street smart and
very shrewd, professional and experienced
traders. Stop
trading against the pros and begin getting rich by focusing on "smart
money" and "dumb money"
instead.
NYSE
specialists, floor traders and other NYSE members like all the well known
Wall Street names and brokerages are the smart money while all others
are the crowd. .
The Charts of Interest below give you an example how the pros call
tops and bottoms. Please
take also a closer look at our Smart Money Flow Index at the bottom of
this page. All the indicators can be found on our pages and they are updated
weekly, respectively daily, in our member section
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How
the Smart Money Flow Index showed the March bottom!
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| This Chart of Interest
shows you the spread between the short sales of the public (dumb money)
and NYSE specialists (smart money). There is a chart of the Dow Jones for
comparison below. If specialists, floor traders and other members of the
New York Stock Exchange are shorting heavily the market is usually ripe
for a correction. On the other hand, if they are doing relatively little
shorting it is most likely that the market has hit bottom, especially if
public- and odd-lot short sales increase at the same time. |
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| This Chart of Interest
shows you the daily upticks minus downticks of the large block trades on
a 10-day moving average. It was a contrarian indicator in the past whenever
institutional money managers and other high rollers were overly bullish
or bearish because they are also the crowd (chart of the Dow Jones for comparison). |
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| This Chart of Interest
shows you the purchase/sales ratio of the odd-lot investors, the smallest
of the small guys, and they are usually wrong at tops and bottoms (dumb
money). They really plunged in when the market corrected after the top in
September 2000, because they expected another leg up. |
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| Advisory Service Sentiment
by Investor's Intelligence - This indicator categorizes the forecasts of
about 100 stock market newsletters as bullish, bearish or expecting a correction.
When sentiment becomes distinctly one-sided, a contrary market move can
be expected as you can see from the enclosed Chart of Interest. The advisors
like to call themselves contrarians, but they are also the crowd. |
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Another
good indicator is the put/call ratio. When sentiment becomes distinctly
one-sided, a contrary market move can be expected as you can see from
the enclosed Chart of Interest. Don't read any further if you think Saddam
is to blame for the recent surge in gold mining stocks and gold. Whenever
the put/call ratio of the XAU went to 2,0 and above it was a good buying
opportunity for gold mining stocks and gold in the past.
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SMART
MONEY BEAT THE CROWD AGAIN IN OCTOBER 2002!!
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Smart
Money Flow Index explained
The Smart
Money Flow Index has long been one of the best kept secrets of Wall Street.
Everybody knows the importance of a closing price and other last hour
indicators like the Closing Tick, which we publish daily for free on our
portal. The Smart Money Flow Index is therefore calculated by taking the
action of the Dow in two time periods: the first 30 minutes and the close.
Whenever the Dow makes a high which is not confirmed by the SMFI there
is trouble ahead (Chart below). The first 30 minutes represent emotional
buying, driven by greed and fear of the crowd based on good and bad news
There is also a lot of buying on market orders and short covering at the
opening. Smart money waits until the end and they very often test the
market before by shorting heavily just to see how the market reacts. Then
they move in the big way. These heavy hitters also have the best possible
information available to them and they do have the edge on all the other
market participants (Smart
Money Flow Index explained). This magnificent indicator has
called every major top and bottom since we are online.
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After
going short right at the top, Smart Money plunged in heavily before the
market exploded to the upside in October!
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How
the Smart Money Flow Index called the bottom
in September 2001:
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The
problem of the Internet is that you have as many gurus as financial web
sites and you don't know whom you should believe. We are of course as
bullish at market tops and as bearish at bottoms as everybody else, but
we stick to our indicators. And anybody who has the slightest idea about
technical analysis will agree that our indicators do indeed make sense.
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Past performance does not guarantee future results!
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