In the investment world there is a difference made between ‘smart’ and ‘dumb’ money. The smart money is invested by huge institutional firms, whereas the dumb money is invested by people aiming for gains in the markets, but don’t really know what they’re doing.
The SMART index (Bloomberg code: SMART index) assumes the that money entered into the markets in the beginning of the day is ‘dumb’ money because people buy some shares before going to work, and the smart money buys in the end of the day to include the extra information in the investment decisions made.
The SMART index is calculated by taking the index at 10.00 AM minus the closing price of the index of the last day plus the closing price of the index today. So if the prices are increasing until 10.00 and drop in the last hour of trade the dumb money is buying and the smart money is selling.
So the buy-signals would be at the time when the dumb money is selling and the smart money is buying en visa versa.
Below are the results of the SMART indicator. The black lines indicate a buy by smart money and the green indicate a buy by dumb money.
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