This is going to be a journal of my way of thinking about trading, trades I take and try to profit out of them. I base my trading mostly on searching for clues on what the smart money are doing. Primarly on US market, as a vehicle trading emini sp and options on US stocks. I exploit fundamental data for a general model and market overview, COT reports and other sources of information which might help me to track smart money. I hope this journal is going to help me keep discipline and maybe is going to shed some light on things that are not so widely known and used for the benefit of other traders who might stumble upon this journal.
First thing I do is try to gauge the overall fundamental sentiment which is based on couple important factors. So as far as being bullish on US market for a long time I can see that there are more and more parts which are alerting me that there might be some troubles ahead. One of the things which made me think about lowering long engagement in large time horizon was latest consumer confidence report, and im not only talking about a number itself but actually the content of the report. The other thing is COT report by cftc which indicates for me a pattern whichc is not positive usually.
Basicaly what I call smart money are large traders (size wise), which for example have to report their positions to cftc. Smart Money are also traders/trading firms which generate consistent returns (following yearly reports of such funds might give a good hints as what and how they operate). In other words rather significant speculators who make money on the market consistently.
This is a smart thing for you to be doing. However, I strongly suggest that you apply all these protocols to the period stretching across '08 thru at least the beginning of '09 and compare what you see now with what you would have seen then if you had been looking, for example, at the period from August through March. Otherwise you run the risk of succumbing to confirmation bias.
there are many resources where you can get to know a lot of information, so the first thing I did was to search them on barclayhedge.com or hedgefundresearch.com, when I looked up interesting firm I digged deeper to see if there are more papers on them available like 10-k forms with detailed yearly reports on things like their portfolio structures in it etc. When I get the picture of how they operate (not in 100% detail ofcourse) I confront it with what I know about global macro or top dwon analyses based on some ex traders from big players (dont want to mention names as I dont want to make an advertisment). Last thing I do I use wide market data analyses, so like tape reading but from all of us market, stocks, futures, options... which lets me trade with a bit more precision so smaller risk and also for intraday trading. Personally for me goldman sachs was the starting point which I wanted to get as much knowledge about how they operate as possible.
sure, there is also a period in 2015/16 were huge amount of really big players made a bet to short the markets and it was even worse for them than 2008. I am aware of that althou these traders are significantly better than retails - obviously - nobody is 100% right. The other thing is their problem is their size usually and procedures which often times they can be avoided by small traders like me - I dont have to be in the market all the time, I dont trade such huge size.
Keep in mind, though, that much of this may have had to do with who the powerful money thought would be nominated and who they thought would win. If you can't filter that out, you may just have to consider that to be an anomaly and not drive yourself crazy with trying to determine the reasons. As for 2008, that was hardly a surprise. And don't forget that the more powerful players are perfectly content to drive prices down so that they can pick up what's on their wish lists at lower prices. Quite often what appears to be wrong is actually smart.
I know exactly what you are saying, I am actually looking at it as we speak, sure its intraday action but I see accumulation from large speculators while market dropped couple minutes ago. The more I digged in this subject as how large speculators operate the more difficult it got to actually follow them. For one thing they allow large moves against them on some assets protecting themselves on the others while I trade usually much smaller group and not that diversified. People tend to think that if they would know exactly how big players trade it owuld be holy grail, in reality one needs to adopt whole new style of money managment and strategies to actually cope with this kind of trading I guess.