Smart money vs dumb money
Updated
The discipline to not give advice and to not try to make new tradingview ideas.
Note
This is especially valid for an asset that can be traded at a margin. Agree or disagree? Please write in the chat below...
Note
Also this assumes that we neglect fundamentals, which I think is a really good assumption in 99% of the cases.Note
Some philosophic thought about this (ignore if not interested):As many of you may know I somewhat believe in destiny. This means that I think it's supposed to be a certain amount of smart money and dumb money. If you think you know the future and were to affect these ratios smart vs dumb - you the affect what is supposed to be. Beware of bugs in the reality simulation is a common side effect. I think this is because of resonance in information slipping from the future to the past to affect the future and round and round in an unimaginable way (google "retrocausality"). This may screw up things, who knows... But if we assume there is a creator (or god) are we really immoral to create these effects if we happen to notice the information that is accidently (or purposely?) slipping from the future. I don't think so.
Note
Note
If you really believe you see a bottom of something and don't want to ruin the momentum and spike of the coming bull run - Then you must wait for all of the hatred and pessimism to exit the system and the weak hands "dumb money" to sell at the bottom. Let them do it. Let them own the stage and do whatever they want. After this it is time for the smart money to enter.Note
I think it's a good assumption to say that the momentum money has no idea where the price is going and has no clue about how to value the asset. The momentum money is therefore just a stream of money that has no bias neither good or bad. They just fill the space created by the smart money and wait for them to control the market (profit taking). Directly when momentum money sells new momentum buyers come in with the same attitude as the earlier one, with no bias.Note
So what about telling your best friend about the bottoming of an asset? Ideally if the reasoning in this educational idea resonates with you and at the same time if you are disciplined to follow this to the end. Then maybe you shouldn't tell you best friend about the bottoming (because he could tell his other best friends). This is rational behaviour. Sociopathic reasoning - maybe, but one should dabble with different perspectives. I'm not following this to the T, but oddly enough I actually think it's a bit virtuous. There's sometimes a thin line between being virtuos and a sociopath, haha.Note
When planting vegetables in the garden we all know that the plant is very sensitive when first sprouting out of the ground. The first look of the sun and the amount of water need to be just perfect and eventhough you do everything right the plant may just give up on life (I'm thinging about when you plant cucumber for example). Maybe you even need a protective thin pastic to keep the moisture level just perfect.This is just as when a bull market starts. New ideas form in the ground and sprouts out in the real world. The smart money is the surroundings like the sun. If there's too much sun (smart money) the plant will die because of it.
The better the vegetable the more sensitive it is when being new born. The same is probably true for an asset...
Consider this.... When growing a bigger plant of tomatoes it is good to starve it from water a bit so that the roots grow longer (to search for water). This is just before the tomatoes starts to form. The effect is that the tomatoes also get more nutrious since the roots pick up more stuff from the earth.
Note
Only weed thrive when getting too much attention (in our case smart money). Weed have long and big roots and spread almost like a cancer tumour in the ground. In the financial world I would say the ground is the birthplace of ideas and madness intertwine. So having too much roots in that idea world means the asset has too much madness and chaos to enter the world of reality (interacts with the rest of the world).The ultimate sign of success of an asset could be similar to a plant in such a way as when bees choose to transport the sweet nectar from the flowers. The booming (blooming) of an asset means it is finally creating a flow of customers and being a part of the ecosystem surrounding it, cooperating, taking and giving.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.