Trade smart

Malaysian Business, Dec 1, 2007 by William Wermine

`YOU'RE either on the inside or the outside.'

- Famous line from the movie Wall Street as emphasised by trader Gordon Gecko

It's really simple; the insiders win at the expense of the outsiders! In other words, there are a few who know the insider's secret and win, and there are those who don't and lose! That's why the insiders keep all these a secret; because they need the outsiders to lose in order for them to make money.

Gavin Holmes, CEO of TradeGuider International from Chicago, is a professional forex, stock and futures trader with over 15 years trading experience. Some of the prominent fund managers in Malaysia, Singapore, Hong Kong and the United States use his software and have been trained by him. Holmes holds online and live seminars to teach his methodology to traders in 38 countries. Each week, hundreds of traders tune in to his live trading events.

Holmes is a student of Tom Williams, who was a multi-millionaire syndicate trader who operated in California in the 1970s. Williams, in his later years, revealed in his book Master the Market how smart money takes advantage of the 90% of losers in the market and how you can trade with the smart money.

Holmes in his Malaysian presentations revealed some of these powerful but little known methods that can be identified with the TradeGuider software. TradeGuider can expose smart money activity in your charts (see Chart 1).

The green rectangle on Oct 31, 2007 in the chart of Maybank signals stopping volume. To stop a down move, demand has to overcome supply that is causing the down move. This, by its very nature, has to be on down bars and is seen after a down move has already taken place.

Smart money is supporting Maybank, as evidenced by stopping volume. The stopping volume should also be high, which is true in this case.

The stopping volume is evidence that smart money is buying Maybank. If news is bad and sentiment weak, this would confirm a floor on the stock. Stopping volume on this day happened after a Wall St collapse. Smart money buys into fear and bad news, taking advantage of sheep investors and traders.

The green rectangle in Chart 2 of the PPB Group marks a test of supply. Smart money drives the market lower to draw out the sellers. If there are no sellers, it means the market is ready to move higher. The drive lower will scare away weak holders or sheep investors. This will usually happen on bad news.

There are many ways to analyse the markets, incorporating both technical and fundamental methodologies. TradeGuider is unique because it does not look at past prices to predict. Ultimately, the markets move because of demand and supply, the holy grail is the ability of a trader to detect how and when the big players or smart money moves the market.

`Markets are driven by fear and greed and in TradeGuider seminars, we teach traders how to be predators instead of the prey. This means to avoid the herd of sheep,' Holmes said.

Gavin Holmes came to Malaysia in October and held 10 events for the public and local stockbrokers, including CIMB and Jupiter Securities. He shared the insider secret to hundreds of traders, which is volume spread analysis or how to identify smart money. After his hectic schedule, Gavin took a week's holiday to Sabah and Sarawak to pursue his passion for deep- sea fishing. Because of the monsoon, he caught only some small fish but has vowed to return next year to catch some big fish.

The writer is a Fund Manager Representative with Phillip Capital Management Sdn Bhd. His email is williamwermine@pd.jaring.my and his website is www.tradethetruth.com