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The Smart Money Really is Smart

Market analysts often speak of “smart money” and “dumb money.” The exact definitions can vary but individual investors are usually considered to be the dumb money in a market. Smart money is the larger institutional investor or the hedge funds.These labels are intended to segment the market participants based on the information they have available to them. Although there is a great deal of information available to individual investors, institutional investors still hold an information advantage.Large investors tend to pay a high price for their information. They may have Bloomberg terminals that can cost more than $20,000 a year to ...
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An Online Trading System You Can Use for Free

Artificial intelligence seems to be taking over the world. While its application to self driving cars and trucks are new, artificial intelligence has been employed by hedge funds and other large investors for some time.Many of these investors are using technology to find and execute trades. For example, funds may subscribe to a service like Dow Jones Newswire. With natural language programming, they set up computers to read headlines and articles.Computer algorithms determine whether the article is bullish or bearish and then creates a trading strategy. Trades can then be automatically implemented by algorithms without any human intervention. This ...
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Pattern in Profits Create Patterns in Prices

The stock market seems mysterious at first glance. Prices move up and down, seemingly based on the whims of traders. There is a sense of disorder in the price movements. Since many individuals prefer order to disorder, there have been many efforts to find order in the markets.Much of the effort has been focused on price patterns. The goal here has been spotting recurring patterns in price, including famous patterns like a head and shoulders pattern. These patterns have some value and are often based on principles of behavioral economics.But, price patterns are subjective and often prone to misinterpretation. The ...
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Beaten Down To Under $5 But Showing Signs of Turning Up

Major stock market averages are trading near record highs. This means many stocks are overvalued. But, it also means we are in an up trend. That indicates it could be beneficial to look for stocks that show signs of improving fundamentals that could be at the beginning of new up trends.Improving fundamentals are important to consider but they are rarely enough to base an investment decision on. Many stocks have improving fundamentals. But, it takes the buying power of other investors to push a stock price up.This is because of the difference between a company and a stock. Although we ...
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Patterns Unlock Profits in Stocks

In the most general terms, there are two types of investors – those who think they are failures and those who believe they can succeed.Investors who believe they are failures will cling to index funds. They tell others that no one can beat the market and to try is futile. So, they settle for funds whose goal is to lose 50% or more in a bear market. This is shown in the chart below.iShares S&P 500 Index Fund (NYSE: IVV) lost as much as the stock market in the bear market that ended in 2009. Investors who believe they are ...
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The Best Trades for November

As we enter the next to the last month of the year, we are continuing to provide real time buy recommendations for a successful trading strategy, just like we have every month since the beginning of the year.Each month, we provide a list of stocks that have historically delivered gains for the next month. It’s time for us to update on this strategy.We are following one of the simplest seasonal trades possible. Few traders follow seasonal strategies although these strategies are often profitable. They are also relatively low risk because they limit market exposure to short periods of time.To apply ...
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Cheap Stocks with Track Records of Long Term Growth

Investors often look at small cap stocks for growth. The math supports this idea. Smaller companies can grow quickly and the stock market is likely to reward growth with a high valuation. This means a small investment in a small company can deliver a large gain to an investor.But, small companies can be risky. They often lack a track record of success that extends back several years which means an investor is buying the stock based on the company’s prospects for the future. The future is, of course, uncertain, and that is one reason there is a high degree of ...
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Technicals for Long Term Investors

Investors who say they are focused on the long run often look for value stocks. They believe that they should buy stocks that are undervalued, hold the position for years and eventually sell at a large profit when the market recognizes the value of the stock.This strategy is reasonable but it depends on the market recognizing the value. The stock market is really a place where investors use money to express their views on stocks. Ben Graham, the great investor Warren Buffett’s business school professor, expressed this in a memorable way.Graham said that, “In the short run, the market is ...
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