Firstly, one of the big ones is ‘order flow/sentiment analysis’.
This involves tracking orders to gauge when extreame sentiment exists. The smart money will position against this sentiment to make the traders lose and pocket a tidy profit.
Crafty, eh?
Secondly, smart money often practices ‘risk management’.
More of a principal than a strategy, the smart money aren’t about to risk their entire portfolio on a single trade. Instead, they set limits to ensure that even if a trade goes sour, it won’t wipe them out.
Lastly, many smart money traders use ‘algorithmic trading’.
This involves using complex AI systems to execute trades at superhuman speeds. These algorithms can identify trends and execute trades far quicker than any human ever could.
While these strategies might sound complicated – and they can be – the essence of each is relatively straightforward. Understanding the market, recognizing conditions, managing risk, and leveraging technology is key to smart money trading.