Ever wondered why hedge funds and institutional investors outperform the little guys?
Because these are big players in the market, often known as ‘smart money’. After all, they’re among the world’s largest investors, using sophisticated instruments and informal channels of insight to make investment decisions. They can access scarce information.
If you knew what they are doing, you would be wise to follow in their footsteps.
Hedge funds go to great lengths to hide their tracks. They benefit from keeping their activity discreet so they can outperform other players. But since they invest money in significant amounts – billions of dollars on ‘aggressive position-building’ or ‘protective hedging’ activity – they’re bound to leave some traces behind.
We call these traces ‘Big Money Footprints’.
The Principle of Charts as Behaviors
What the market will do next is the big unknown, however, you can learn to recognize these footprints in the market now and ‘paint’ a picture of what might happen next. This can be done through charts.
The issue is that charts can be complicated, and reading them is not just about technical analysis, it’s about understanding the drivers of the key players to formulate a supply-demand story.
In fact, the number one mistake that most traders make is that they fail to look at a chart as behavior. When we can look at a chart and spot the behavior of the big leveraged players, we significantly increase our odds.
Don’t forget, hedge funds move billions of dollars but when they’re investing in a stock they won’t buy millions of shares all at once. Instead, to prevent the price from spiking, they’ll ‘scale’ into a stock over a period of time.
This is why swing trading involves selecting stocks and taking trades that last a couple of days up to several weeks or months in order to profit from an anticipated price move.
Stock Selection the WiseTraders Way
So, finding the best stocks is a matter of finding out where these big investors are putting their money.
Easy, right?
Not quite. While some of the information is public – like surges in trading volume and price spikes – only ‘hidden’ signals can reveal explosive stocks before they become big news.
At WiseTraders we use a patented ‘Options Volatility Indicator’ (the OVI) to reveal these ‘hidden’ signals. The OVI is derived from options data and distinguishes between ‘aggressive position-building’ activity and ‘protective hedging’ activity.
Using the Big Money Footprints to Identify Trade Setups
We apply four parameters to a chart – our ‘Big Money Footprints’ – to reveal the psychology of the players and put together a ‘story’ of the market.
When looking for ‘explosive’ trade setups, we need to see evidence of ALL four of the ‘Big Money Footprints’.
- A Volume Pocket
The basic laws of supply and demand. The first footprint of big money activity is a relative spike in volume traded in the last 30 days. Big money moving in or out of stocks will create imbalances that will lead to price movement. The key is to identify exactly the type of imbalance and then pick the lowest risk time to make your move. - Aggressive Big Money
Recent big money must have moved the price in a significant way. So we’re looking for a recent price jump (a gap up or down), showing that the stock price is responsive. This means the big money would have been aggressive and with a purpose. This is ideally followed by a consolidation and tees up further movement if other key markers are satisfied. - Key Levels
A key level is crossed and held. But watch out: the trading world is packed with thousands of support and resistance theories. We like to keep things simple and focus only on those that will attract the most attention from professionals and amateurs alike. - Hidden Leveraged Money
Our secret source of information. The OVI indicates options activity from leveraged professionals for that stock. If you know what the big players are doing, then the odds of a favorable move are dramatically enhanced. Align with the other key big money markers and our 4-step E.D.G.E trading plan, and you have a system for life.
5 Stocks That Should Be On Your Radar Now
Get our report “5 Stocks to Watch for Explosive Growth”.
In this report, I highlight 23 stocks that you can watch for potential explosive moves in the first half of 2022.
All of them are exhibiting the signs of ‘Big Money’ that we look for. Get your free copy here.
