Smart Money Dumb Money

[MX]

Off USA forum thanks Jim


As a general rule, dumb money trades in the first hour each day and smart money trades in the last our of each day.

The reasoning for this distinction is as follows.

Dumb money- these are people that trade on the news from yesterday's close to the current days open. they are emotional traders that are short sighted and driven almost exclusively by emotion. They trade when the days news is at its peak.

Smart money- these are people that trade in the last hour of the day. there is almost no news that comes out in the afternoon. they have also taken the time to delve into the days news and taken the time to reason its impact. they are usually more patient and take a longer term view.

when studying this over time you realize why you are good to follow smart money. Look back at the Sept- Nov decline. we had early morning rallies with sell offs in the afternoon. late december thru the present, there has been selling in the morning and buying in the afternoon. Look at a six month chart with the above in mind. you will see the noted difference in the direction of the market.

JIM

 

[shelman]

MX
I'm a little confused.
Does this mean that daytraders should buy in the last hour, hold overnight and sell in the morning,exposing the position to risk outside ones control, or does it mean wait till the morning rallies are over, buy then and sell at a loss later?
Steve

 

[sefty]

hhhhhmmmm

This does not take into account how we often trade ie we watch a falling stock and catch the bounce.

 

[MX]

I'm not sure about that Shelman I picked this up of a board and found it a very interesting view.
Also picked up this off another board along the same lines.



Yesterday in London therewere a few what I call "Black Hole" stocks, where the stock is marked down agressively in the morning on thin volume to take out the weak bulls and quite possibly catching a few unwitting bears out as well. The afternoon is then spent buying up stock at lower levels by the institutions who marked them down so vigerously in the mroning.

Clever isn't it? This is always a bullish signal.

Thanks Anthony

http://www.freequotes.co.uk/axl-dlls/publish?url=/entrance.html&page1=anthony_morris

 

[Riz]

Thanks MX..both posts are worth to be used to start discussing the issue of trading in the first and last hour of the market..

I only trade when I feel/think the price is about to go up (long) or down (short) and always try and do it at the precise point..not claiming of course that I always hit that point...only when I do it I don't check the time, as it doesn't matter in this case...

Having said that I think it's worth to note that the prices tend to be marked down or up aggressively by the MM early morning...and start to settle and establish its base of the day after 9.30...this of course makes the early morning trades a bit risky..ie.if you intend to short a stock, it wouldn't be wise to open your position when it is marked down aggressiely...and the other way round for long positions...it of course all depends on your position for the day...one may well make good use of this sharp price movements if they have a well-founded idea as to where the particular stock might head up that day...

So I wouldn't go with such generalisations as buy/sell in the morning buy/sell in the last hour etc...but it is certainly very useful to have a proper knowledge of the market conditions comparing morning to late afternoon, etc..

rizgar

 

[shelman]

MX
Your original post was quite correct.
There is a clear difference between investing and trading.
Institutions tend to invest and as such accumulate stock at the best price possible. That is why fundamentals are more important to the investor than TA and why TA is more important to the trader.
I'm quite new to trading but a very experienced investor.
Times are changing though and the NET is bringing the market to the investor, hence my interest in the chatroom and this BB.
The other point is that it is the MMs that mark down the price and surprisingly the institutions take advantage, resulting in COOKIE jumping up and down.
During the oil price debacle in late 98/99 huge buys went through when all the bears were committing hari kiri...if only i'd known this then.
Hehe