The phrase smart money comes into the equation much more these days and it actually refers to good old fashioned capital invested by institutional investors such as central banks, hedge funds and very professionally knowledgeable market experts who possess superior information together with extensive experience in the field and significant resources. The market participants can influence market trends and are assumed to possess greater understanding of the market dynamics than an average retail based investor.
It is generally said tha there can be 3 Ms in making money. These would be be firstly, make the money then manage that money, before you can multiply this money. Sart money will tend to concentrate on driving long term market trends rather than the retail trading system which acts on emotion rather than data. The institutional investors trade based on macro-economic factors. Some commentators in the field will suggest analysing retail and smart money sentiment; however it is possible to trade using both retail and smart money sentiment. The successful trader will naturally understand and interpret various sentiment signals, which when aligned with retail can signal strong moves in that didrection. However following the smart money option will often prove the most prudent, particularly when all markets trade in a volatile situaiton.
