The Basics Of Volume Analysis
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VOLUME ANALYSIS AND TRACKING SMART MONEYVolume is perhaps the most under-rated indicator in the markets. Volume shows the activities of the big hedge funds and proprietary desk traders, players we often refer to as "smart money". Good volume analysis shows critical points at which markets turn around, when activity levels are low or high or when smart money is active or inactive. In this course, we analyze various stock charts, and combine volume analysis with price action. Volume also provides a storyline to the markets. Constructing this storyline correctly is critical in terms of trade entry and exits.
Smart Money or Big money has always tried to (legally) manipulate the markets to their advantage. Their goals are to conceal their activities as much as possible. But Volume is one indicator they cannot conceal. In many ways, this course levels the playing field for the average retail investor. Once you take this course, you'll know what to look for, and you'll be in a position to track smart money as they're entering a Stock or they're running for the exits. And your objective is to "follow the smart money". When you position your trades in harmony with the money flows of smart money, you're adding a whole layer of high-probability characteristics to your investing activities.
This is an exciting course !
In this Section, we explore why Volume is a critical indicator to study, and why this is the only indicator that clearly shows the activities of Smart Money. What can Volume analysis tell us about activity levels in the markets. Volume is sometimes referred to as the "fuel of the markets", and this is very true. This Section also defines some of the rules of "Smart Money". These rules form the basis for the games and that Smart Money play, and the tactics they deploy to manipulate the markets to their advantage.
This section is a deep-dive into the methodology for spotting and tracking "Smart Money" using Volume analysis. A perfect timeframe for analyzing these activities was during the period preceding the financial crisis of 2007/2008 and the period after the bottom in March 2009. And there is no better instrument to study this than the S&P 500 Index itself. This section is a fascinating and shocking analysis of how we could spot Smart Money doing the following -
- Start selling in March 2007, about 6 months before the top in October 2007
- They sold ("distributed") for about 9 months with barely a move in price
- Ran the bear market down to their liking
- Start "accumulating" stock by the end of 2008
- Finished accumulation phase over a period of 9 months
- Are running the Bull market right now to their liking
Detailed case studies of major stocks analyzing Smart money activity points -
1) BIDU - Smart Money is in, and they are not leaving
2) CAT - Similar to BIDU but more choppiness
3) FSLR - Gave a clear signal of smart money entry
4) NFLX, PCLN and FXE - Gave various signals for entry and exit
5) Silver Case study - Smart Money left Silver and has not come back yet.
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|Section 1: Introduction to Volume Analysis and Smart Money|
•Volume has to be analyzed with price
•And apply a market methodology to this context
•Volume shows when smart money is exiting and when they are piling in
•But first we must understand
–What does Volume tell us
–What price did on that volume
–Where does this fit in with the market story
Most importantly, we must understand what are the "rules of smart money"
|Section 2: Tracking Smart Money|
|This lecture is a fascinating look at the period between 2003 and 2007 in a bull market. The S&P 500 Index is analyzed in detail for critical information about the activities of smart money. And in particular, the period leading upto the top in October 2007 where we can clearly spot Smart Money running for the exits.|
|How does Smart money actually get out of its holdings and how they avoid the prices going lower during this time. The Distributing phase is when euphoria levels are high, and the average retail investors are left holding or buying stock at the highest levels.|
|Once smart money is finished with distributing stock, they are ready to run the bear market down. Stocks must move in an up and down cycle for smart money to make their money.|
|Once prices have gone down far enough, its time for Smart Money to pick up stocks at the lowest price. Stocks are a bargain at this point, and the panic stricken public is dumping stock at ridiculous levels into the waiting hands of Smart Money.|
|Section 3: Case Studies - Detailed Volume analysis and Smart Money activity in various Stock charts|
|Case Study of a 3 year chart on BIDU. Smart Money has piled on to BIDU and they are still in it.|
|Similar to BIDU, Smart Money was able to get into CAT at ridiculously low prices.|
|Smart Money and volume analysis clearly show money coming into FSLR in this case study.|
|General case studies of NFLX, PCLN and FXE. Many a time, there are no signals. You only trade on strong signals, and not try too hard to find a signal where there is none.|
|A case study on the Silver chart for the last 3 years. Smart Money ran for the exits (but they did give enough signals that they were running), and they have not come back again.|
Volume analysis and Smart Money quiz
|This is the concluding lecture capturing key elements of Volume analysis|
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Hari Swaminathan is the founder of OptionTiger, a cutting-edge Options education and trading company based in Washington D.C.. Hari is an entrepreneur, everyday person and a self-taught Options expert for over 8 years. Hari has a Bachelors degree in Engineering from India, and MBA degrees from Columbia University in NYC and London Business School in the U.K.
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