Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

How to Look for Smart Money Flow?

1 min read

Identifying Smart money flow is the key essential skill for every professional trader. There are many online tutorials and indicators which explains how to spot smart money flow. But how one can identify using a simple volume and open interest technique to look for a context behind smart money flow?

Ideally speaking, most of the smart money holding period ranges anywhere between few days and few weeks or even months. When comes to futures trading we use first 1 hour volume and open interest to identify the smart money flow.

In Equity Derivative markets, if any of the stock futures first 1 hour turnover increases more than 300Cr to 800Cr range or more than that with greater open interest addition which is significantly higher from the last 30 days of first 1 hour turnover then possibly smart money role is there provided there is no news or event based speculation.TRADEx

Because event based speculation attracts higher turnover. For Example

1)Political Events (Govt Policies, Election Results, Geo Political Events)
2)Earning Results
3)RBI Announcements
4)Corporate Actions(Split,Bonus,etc)
5) Grading the stocks by Rating Agencies/Brokers like CLSA, Moody’s

Apart from these speculative action, if a stock attracts huge turnover, then smart money role is heavily involved there. Recent Examples are, Sunpharma made a short term bottom on 14th Aug 2017 where the turnover was 635 cr with significant open interest additions 7% – Long Buildup in the first 1 hour of trading. Volume traded in that first 1 hour was above 30 days average.

Volume Shockers from Tradeaction is a smart money flow scanner to identify where the smart money is parked in the first 1 hour of trading. When we talk about smart money, it generally refers institutions / insiders who knows better information than the general Trading/Investing crowd.

SunPharma – Volume Shockers

Another classical example is, LICHSGFIN made 24% Open Interest short addition in the first 1 hour of trading with 449Cr turnover which is greater than the 30 days average. Volumes happened in the first 1 hour is quite abnormal which indicates that smart shorts entered in the system with an average traded price of Rs696.63.

LIC Housing Finance – Volume Shockers

How to Scan for high volume/turnover?

httpv://www.youtube.com/watch?v=EjWpulyTW9U

Once you launch volume shockers screen by default you will get the list of stocks traded in the first 1 hour. You can also use this information for post market analysis as well.

Further filtering can be done based on the symbol, turnover or Open Interest Interpretation. For ease of use, TRADEx users can identify the smart money flow by using Volume Shockers Scanner with yellow highlighter as shown below. If you are not a TRADEx user you can sign-up here for a 5 days free trial here

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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