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Friday Feature: Thriving in Bear Markets – Part 2: Smart Money vs. Dumb Money

May 1, 2020

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The most foundational skill of smart money is the ability to separate their bias, emotions and opinions from their data driven analysis.  For example, on April 28th, 2020, I asked a group of traders within Tackle Trading community about their trading outlook for the month of May, 2020.  Virtually all of them are still bearish or neutral.  Although I understand where they are coming from because I feel the bearish bias as well, but I am a bull for the month of May simply because price action have firmly crossed MA 50 and bullish setups are everywhere in majority of the sectors. 

Look at the data please, stop watching the news or try to put reason behind why price moves the way it does.

Is it hard to trade bullish moves in an overall bear market?  Not if you think like smart money!  Try to use your counterintuitive thinking to observe how the masses are reacting and do NOT do what the masses are suggesting in the news or media.  I’m not trying to say all of news is bad and untrue, but what 90% of people believe in will NOT work in your trading.  You will NOT be on the profitable side of the trade if you still act like the 90% of dumb money.  In fact, the existence of dumb money is for the smart money to be profitable.  90% of the population transfer their wealth directly to the 10% in the markets based on popular beliefs.

Let me give you some examples.  We have had some very popular views in the media about what’s going to happen in the market that plays to the tune of the dumb money:

  1. Test the bottom theory that may not happen
  2. Sell in May get to be important with no real data
  3. Recession is here. Hmmm…I don’t see it on the chart

No one knows what’s going to happen.  Smart money follow price action and data driven approach to their analysis to trade accordingly. 

QQQ has had higher high and higher lows breaking above all Moving Averages.  If you learned anything in Technical Analysis, you would know this is a bullish trend with outlook to be bullish.  What prevents you from this logical smart analysis is your own cloud of emotions still stuck with the dumb money.

Pearl Li. The Theta Finder. In the Making.

Tackle Trading: Pearl Li.

Pearl Li previously has been a product management professional for more than 10 years working at well-known companies such as Amazon and Nielsen Company. She took the leap in 2016 with Elite Legacy Education to learn about building long term wealth through financial market trading/investing. In 2018, Pearl happily left her job to pursue investing/trading fulltime producing theta style trading that generates monthly cashflow. She is thrilled to be a voice on the Tackle Trading platform to share her transformation as she goes through various phases of her growing experience.

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1 Reply to “Friday Feature: Thriving in Bear Markets – Part 2: Smart Money vs. Dumb Money”

  1. Avatar Kerk LeBlanc says:

    Good blog. This is right on the mark.


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