Using the work that other people have already done is a great idea when it comes to trading since it saves you a lot of time and effort in doing your own research. This is why a lot of traders do what is called “chasing the money.” They wait to see what the big banks, hedge funds, and insurance companies are doing with their money, and then follow suit. As long as the money you are chasing is being placed by a reputable group, this can be extremely lucrative. These companies spend millions of dollars each every year making sure that they have the best research being performed internally, and there’s no reason why you should not benefit from this.
Before you do this, keep a couple things in mind. One, your information will always be on a delay. No one from Morgan Stanley is going to give you a call and let you know that they are about to invest $2 million in GE in a few minutes. The information that you will have will always be a bit behind, even if you have a good ticker news source streaming to your computer. This is fine for investors, but short term traders always need to act quickly, and if the situation you are looking at has already happened by the time you get your data, you miss out.
Two, remember that the big institutional traders have a lot more money than you. If someone invest $2 million in GE, and the stock goes up $0.25 in a couple hours, they have made a huge profit because GE is currently priced at around $26. A quarter represents about 0.5 percent of the total investment, and that is a quick $10,000 for the investor in less than a day. A smaller day trader would have a number much smaller than this performing the same trade, and it might not be big enough for them to turn a worthwhile profit depending upon how much they risked. Add on brokerage fees, and a positive movement in price might even lead to a loss.
Methods to overcome this exist, and should be used. One, if you have a signals service, you can get trading information and tips instantly, and sometimes before it happens. A lot of these revolve around short term trades, too, so you can keep your routine the same, but have relevant info before it’s too late. And two, you can find alternative modes of trading. Binary options allow you to profit off of tiny movements, as does Forex trading. If you’re used to stocks, the Forex and binary markets can be tricky, but a lot of the same principles apply if you are a short term trader that focuses on technical indicators. Plus, with leverage (generally reserved to the Forex market), you don’t need to invest $2 million to see a big gain. You can just have your money multiplied at the time of the trade’s execution. Some binary and Forex brokers allow for welcome bonuses too, which allows you to sometimes double your trading cash–and thus your potential–just for creating and funding an account. No reputable stock broker is doing this.
The trick is, you need to be looking for ways to innovate and streamline your trading. Following money is a hugely successful method, but the traditional ways of doing so are not necessarily the best ways to do it. Spend some time researching your trading methods, and this will make it easier done the road and cut down on how much research you actually need to do moving forward.