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Traders often say ‘’follow the smart money’’ or follow the big money. But how are you supposed to do that? The closest we have to knowing what the ‘’Smart Money is doing in forex is the COT report. But that report comes out late on Friday and only includes the positioning as of Wednesday. So by the time we get to trade on this information on Monday, we’re already five days late. Plus, the COT report shows positioning in the futures currency markets, not spot FX. No doubt there’s a lot of overlap and the same players are probably trading both markets but a better indicator would be forex positioning.
Bet Against the Dumb Money
The ‘’Smart Money’’ can be in the markets for various reasons other than taking a directional bet. These include hedging by large multinationals, arbitrage or just old-fashioned market making by banks and high frequency firms. In my experience a better course of action is to bet against the ‘’Dumb Money’’ instead.
Who is the ‘’Dumb Money’’ in the forex market? In large part, retail traders are the proverbial ‘’Dumb Money’’. Before we go on, let’s see why betting against retail forex traders is a good strategy.
Cut Profits, Let Your Losers Run
A large US r…
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PipPoint avatar
PipPoint 3 June

yes very useful information

romakoksa avatar

interesting article!)

romakoksa avatar

а well done

iiivb avatar
iiivb 17 June

i am not that prone into the use of sentiment index for my trading but indeed was useful and insightful your explaination! thanks for the time and effort! wish u best of lucks!

mcquak avatar
mcquak 28 Sep.

If only I was reading it at contest time. You would definitely had my like. Strategy "going against crowd" has got rationale behind it, and with some additional filter added it can work. Good article.

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By just knowing how smart money operate in the market you can gain an edge in the financial markets and no matter if you're a profitable trader or not, knowing the concept that I'm about to share with you in this article can give you more insights into the structure of the FX market.
The number one reason why you would want to know how smart money operate in the market is the ability to proper time the market. Timing the market is one of the greatest challenge that any trader can have. The capability to spot market turning points before they happen can yield higher risk-reward ratio. By having the ability to enter a trade as close as possible to the market turning point, you enjoy 3 major benefits:
  1. Low Risk: By entering as close as possible to the market turning price you can use small SL order, which in turns allows higher position size which will yield more profits but at the same time minimizing the losses.
  2. High Reward: Entering as close as possible to the market turning price will give you the possibility to catch the majority of the move.
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WallStreet6 avatar

Very interesting article! and good point with the DXY

marius24 avatar
marius24 26 Aug.

thank you for giving me a new idea in trading:)). Quite informative this article and yap the timing is everything in this risky environment.

Berkeley avatar
Berkeley 26 Aug.

good work as ever ;)

Daytrader21 avatar

marius24 Yes you're right if we can figure out how to perfectly time the market we as traders can be far ahead.

Daytrader21 avatar

Berkeley Thanks.

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"You do need to recognize that professional traders can do a number of things to better their trading positions: Gapping up or gapping down, shake-outs, testing, and up-thrusts are all moneymaking maneuvers helping the market-makers to trade successfully, at your expense – it matters not to them, as they do not even know you." - Tom Williams, Former Institutional Trader and VSA creatorVolume Spread Analysis (VSA) is the improvement upon the original teaching of Richard D. Wyckoff (1873 – 1934) by Tom Williams, a former professional operator in the stocks market for 15 years in the 1960s-70s. Williams improved the work started by Wyckoff by further developing the importance of the price spread and its relationship to both the volume and the candle close.This method is proven and time tested, even though it has been constantly updated and upgraded to keep up with the market changes. The World Cup Trading Championship has been won several times by VSA traders - Tim Rayment, for instance, won in 2009 with a 44% gain.VSA seeks to establish the cause of price movements. The “cause” is simply the imbalance between supply and demand in the market, which is created by the activity of profes…
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jlongo avatar
jlongo 21 May

Very interessing article for me. Waiting for more about this subject.

Jester avatar
Jester 27 May

VSA has nothing common with complexity. It's very simple and clear concept but You have to make great job to reconstruct Your brains to think differently :) Definitely nice introduction to stuff that really matters for trading.

Daytrader21 avatar

Nice article I may study more the VSA after reading your article. Currently I use Elliot Wave theory but I heard many praising VSA trading.

Grizzly avatar
Grizzly 28 Aug.

объём в реальном времени может быть токсичен

alexpomorin avatar

To moderator : PLEASE make a rule to publish in ENGLISH only.  Reading here other languages is rediculous and shall not be allowed. Otherwise you will end up with no English at all. There is a reason why people in international community and in inyernational trading platforms restrict users to English only.

So. Please follow the standards.

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"When you enter the markets, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business. You are in a highly specialized industry - under the intense study by men whose economic survival depends on their best judgement. You will certainly be exposed to advise, suggestions, and offers of help from all sides. Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound." – John MageeIf you have ever listened to the above quote, you may have known that there is no perfect method to make money in this business, no Holy Grail, no money-printing machine method... But we certainly have an edge if we see at what big guys see. It is clear that when you have a very big amount of money to invest, you are not likely to watch for complex technical system. You would rather plan for risk events and trade from an economist's perspective. Thus, the more simple your technical system is, the more effective and less time-consuming your decision making process would be.In this article, I will guide you through how to setu…
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auto1 avatar
auto1 13 Dec.

Would you you please explain as to to what is the purpose /usage of high/low/close of same ma? Nice article,

thanh_trang167 avatar

Hi, the purpose of applying SMA with the same time period on high/low/close of prices is to know when we get into the support/resistance zone better. It is a zone; therefore, doing so will erase in your mind the idea that support/resistance is just a single price.

Likerty avatar
Likerty 14 Dec.

Interesting approach:))

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