Saturday, June 16, 2012

Importance of Money flow

Money flow is the key for any scripts or any index to move up or move down. Money flow always control the smaller market. And every traders success depends on the proper reading of Money flow over specific script on specific time. Now the matter is how we can track the money flow which effect the script movement and get us the right timing. In naturally every uptrend started with avg money flow over 2-3days and after that next 2-3days volume getting dramatic change and money flow spreading over some selective sector or scripts, gradually volume getting higher and higher.Within 3-4days money flow change the dimension of the script and getting it in hit list and after that lots of rumor spreading in the sky and price and volume both r breaking all past record.

Now lets discuss about the most important part what is smart money and what is weak money. Smart Money means the money which get control over any script or index to move forward or downward. and weak money means when the smart money exited from the market and retailer and small investor bought in high rate and being caught for a period and trying to trade the script by averaging their price gap. when the market is in control of weak money no trend will be visible as all retailer and small investors will controlling the market by averaging their script. also some newbie will inject money thinking that in future market will be good and they will get good profit. Most of the small market get this effect after a mid level bull run. Weak traders are feeling that downtrend is over after index fall down in certain level and start buying which creates some dead cat bounce in index but in maturity again they feel that index will fall further and they sale out their holdings and create more sell pressure over index which put market in more downfall. This process running for a period of 10-15days in mid level downtrend due to lack of smart buyers.

At a certain level of index this weak traders feeling that nothing to lose now as they feel that they will go for longer version of investment as they have lose enough. This is the period when seller losing interest to sell and volume is stopping and decreasing day by day. Within this time smart money starting to consolidate and Market volume is gradually increasing 2-3days with positive nodes and within next 3 days money flow jumps overs as all idle smart money will show the competition to enter the market and this is the time to select the script where smart money jumps. In small market like Bangladesh big paid up good fundamental scripts will start to run because buyer can buy easily as much as they wish and can stop the seller to bid low. Also due to big paid up run index also showing the pace. As long as these smart money trying to control the market Index stayed in uptrend and day be day other weak money getting their price back and selling out their current holdings and starting to buy the running item for getting good profit. This is the period when smart money again selling out their script and keep away from market or keep interest to other sector other script. When smart money moves one sector to other market get stable. But when smart money not shifting from each sector or script to other sector or script market get weaker and weaker.

The main buzzwords of money flow is " The Smart Money always get the gain and the weak money need to take all pain". So be smart in your trade and be with the smart money.

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