Can You Get Rich by Following the "Smart Money"? // Follow institutional order flow, dark pool trading, block trades, on balance volume, on balance volume indicator, dark pool explained, stock market investing strategies welcome to looking at the markets with David Moadel
today we're going to try to answer the question
can you get rich by following the smart money block trades institutional order
flow
these are some of the terms that vaguely lead us to the notion of smart money
these evidently are powerful investors that make profitable trades before the
dumb money or retail traders try to jump on the bandwagon but inevitably end up
missing the boat
often it is asked whether retail traders can trade alongside the smart money
mirroring their trades and effectively piggybacking or riding their coattails
- big profits who is the smart money anyway
the term smart money generally refers to some or all of the following
high-frequency traders hedge funds market makers large institutions
algorithm-based investors and any person or institution that makes very large
volume trades at any given time the vagueness of the term smart money makes
it difficult for retail traders to follow them because it's not exactly
clear who they are
besides the trades of large investors can be highly misleading and blindly
following their moves might not benefit retail traders
for all we know
a seemingly bullish moved by the smart money
might actually be short covering or a hedge against a bigger bearish position
for example buying shares or calls of SP why as a hedge against a larger position
in a vicks product or classic market manipulation using their big influence
to drive up the price of a stock before retail gets in and then selling while
retail is left holding the bag while a seemingly bearish moved by the smart
money might actually be profit-taking or scaling out of a bigger foolish position
or a deliberate attempt to take out
retail stop losses before turning around and pushing the price higher
besides some of the really big trades aren't available for retail traders to
view until hours later or even a day later by then it's probably too late to
do anything useful with the knowledge of those trades
while retail trades are transparent the smart money has the privilege of making
temporarily secret or hidden trades
this is known as dark pole trading and while it might be controversial
it's currently legal in the United States Chartists might try to use obv or
on balance volume as a proxy for smart money movement in order to predict where
price action will go
personally I find that on balance volume tends to move in tandem with price
action rather than before it thus diminishing its predictive ability
to conclude I would recommend against trying to follow the smart money as a
get rich strategy instead focus on building a safe consistent plan for
long-term growth in your trading account if you'd like more help with this or
with anything having to do with finance stocks or options
please feel free to contact me my name is David Modell
you can reach me anytime at David Modell @ gmail.com
I hope this was helpful and I hope to hear from you very soon