The Smart Money Indicator(Black Line)
This is the newest technology to hit the market and it can give you an insight into the activity of buyers that has never been possible before. This tool will enable you to tell whether buyers are purchasing larger or smaller amounts parcels of shares than normal.
In short, it can help spot when people have invested heavily (or are currently investing heavily) in a company. After all, no-one we know spends big money if they think the stock is going down.
How does it work?
It compares the buying pressure of the shares (the Nielsen supply demand indicator) to the pressure of the individual buyers which we can see in the depth queue. Simply, when the black line increases, it means that the buyers (on average) are prepared to buy more shares than the sellers are prepared to sell. When the black line goes down, it means that the sellers (on average) want to sell more shares than people are prepare to buy.
When the ratio is one, it means that the buyers and sellers are wanting to trade the same average size parcel.
So how do we use this information?
We use it as another clue to our trading decisions. If you see the Smart Money entering a stock, it could mean that people who know more than you do are investing heavily. You have to then ask yourself - Do they know something you don't?
In conjunction with your other research, this can be a very powerful clue as to the future price action - especially in the small to mid cap stocks.