science

Smart money index

Smart money index is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Smart money index rather than just read about it. In short: The Smart money index (SMI) and the Smart Money Flow Index (SMFI) are both technical analysis indicators demonstrating investors' sentiment. While the SMI was invented and popularized by money manager Don Hays, the SMFI is based on Hays' SMI but uses a slightly different and proprietary formula to measure the investment behavior of institutional investors.

Key takeaways

Smart money index belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Smart money index to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Smart money index from memory before moving on to harder problems.

Reference excerpt

The Smart money index (SMI) and the Smart Money Flow Index (SMFI) are both technical analysis indicators demonstrating investors' sentiment. While the SMI was invented and popularized by money manager Don Hays, the SMFI is based on Hays' SMI but uses a slightly different and proprietary formula to measure the investment behavior of institutional investors. As a result, the two indicators can produce different signals, despite appearing similar. This is why the SMFI is called the Smart Money Flow Index which is also featured on Bloomberg Professional. Both indicators are based on intra-day price patterns. The Smart Money Index (SMI) is a composite sentiment indicator that is based upon intra-day price patterns in the Dow Jones Industrial Average. This Index was described nearly twenty years ago by Lynn Elgert in the February 22, 1988 issue of Barron’s.

Basic formula The basic formula for SMI is: Today's SMI reading = yesterday's SMI – opening gain or loss + last hour change For example, the SMI closed yesterday at 10000. During the first 30 minutes of today's trading, the Dow Jones has gained a total of 100 points. During the final hour, the Dow Jones has lost 80 points. So, today's SMI is 10000 – 100 + -80 = 9820.

References

Worked examples

Example 1 — a first encounter with Smart money index

Start with the simplest possible case. Write down what Smart money index claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Smart money index before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Smart money index ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Smart money index

In research: Smart money index appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Smart money index in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Smart money index is common in secondary-school and first-year university syllabi. It links to neighbouring topics Technical indicators, so understanding it makes those chapters shorter.
In everyday life: Look for Smart money index outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Smart money index in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Smart money index means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Smart money index out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Smart money index in simple terms?

Why does Smart money index matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Smart money index?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Smart money index.