Balance Of Power Hybrid Stock Indicator

So Powerful It Reveals Dark Pools in the Automated Markets

One of the critical factors that separates highly successful traders from those who struggle with mediocre returns is the awareness of how new trading venues, new order processing, and new algorithms have forever changed how stocks must be analyzed to maximize profit potential in all trades. Today analyzing stocks using the Balance Of Power hybrid stock indicator reveals Dark Pools in the automated markets.

The most popular and prevalent indicators for stock analysis are the Price and Time indicators. There are over 200 Price and Time indicators with MACD, Stochastic, Bollinger Bands, and RSI being some of the more popular ones. By contrast there are less than a dozen Volume and Time indicators, and only a few rare Hybrid indicators such as for example the Balance Of Power hybrid stock indicator which contain all three pieces of data including Price, Time, and Quantity aka Volume.

Indicator training webinar to learn more about this indicator which tracks large lots versus small lot activity.

Quantity data has the least amount of stock indicators because at the time Technical Analysis was being developed one hundred years ago, Price was the most important indicator for stock analysis and was used both by Fundamentalists and by early “chartists” later known as Technical Analysts.

However nowadays with 80% of all the market order flow fully automated, with internalized order activity on the rise, and Dark Pool activity increasing the Price indicators are no longer the most important analysis needed for both Fundamentalists and Technical Analysts.

What is far more important are the hybrid indicators that combine all three data into a far superior, more complex algorithm formulation to reveal the size and incremental buy or sell patterns of giant share lots over time as shown in the Balance Of Power hybrid stock indicator.

Related Article: Indicator training webinar to learn more about this indicator which tracks large lots versus small lot activity. Click HERE

Quantity data has the least amount of stock indicators because at the time Technical Analysis was being developed one hundred years ago, Price was the most important indicator for stock analysis and was used both by Fundamentalists and by early “chartists” later known as Technical Analysts.

However nowadays with 80% of all the market order flow fully automated, with internalized order activity on the rise, and Dark Pool activity increasing the Price indicators are no longer the most important analysis needed for both Fundamentalists and Technical Analysts. What is far more important are the hybrid indicators that combine all three data into a far superior, more complex algorithm formulation to reveal the size and incremental buy or sell patterns of giant share lots over time as shown in the Balance Of Power hybrid stock indicator.

This is due to the empirical evidence which consistently proves that the largest and most important institutions DO NOT MOVE PRICE. It used to be that when giant and large lots started moving through the exchanges, their orders were shown on the limit order books of market makers and everyone using day trading systems could see these huge lot transactions moving through the order processing system. This caused a domino effect of Day traders, Scalpers, Professional Traders and Floor Traders who all tried to jump in ahead of the giant lot orders to take advantage of the surge of Volume these huge lot orders created. It was not called “front running” then, but that is exactly what it was just like the front running of HFTs nowadays. The giant funds got rather tired of this and demanded venues that would protect them from this activity.

Today the giant and large lot orders are not shown on market maker limit order books but are contained within the Dark and Twilight Pools. The intent of these “unlit” aka non-displayed pre-trade order platforms is to avoid moving Price while the giant lots are buying OR selling their long term invested stocks. The purpose of Dark Pools is to provide a venue for huge lot order flow where there is no interference from speculators, which caused prices to move suddenly due to the large lot orders moving through the exchanges in prior decades. Without others seeing their pre-trade orders, Price holds at a steady range and therefore Price and Time indicators fail.

Hybrid indicators are extremely rare. Only a few exist at this time, but it is likely more will be written by the next generation of indicator writers. In the meantime, there was one indicator writer in particular who was so ahead of his time that his work has not been as popular or as recognized for its significant value to both technical and fundamental traders. Don Worden remains one of the most brilliant indicator writers of his generation, and yet the least known of the top 5 indicator writers. His theories were so far ahead of their time that it is only now traders are beginning to recognize his work as extensively impressive.

Related Article: Webinar teaches the 5 Essential Stock Indicators, Price vs Quantity, and indicators for Dark Pools & High Frequency Traders. Click HERE

His body of work now represents the most important indicators for stock analysis. Today we will study one of his best and most unique indicators which is the Balance Of Power hybrid stock indicator.

To understand this indicator and how to properly use it in the automated market requires an understanding of several factors that make it so incredible for technical and fundamental traders.

I have been studying BOP since it was first introduced to traders via the Telechart Charting Software and which is now included in the TC2000 version. As a Chartered Market Technician CMT, I have studied over 200 different stock and market indicators searching for the best stock indicators for the evolving market structure.

What struck me with the Balance Of Power hybrid stock indicator was its uncanny ability to diverge from Price, whereas Price indicators merely mimic or follow Price action.

As the market structure continued to evolve over the past decade and Dark Pools for huge lot order flow became the norm, the Balance Of Power hybrid stock indicator also started changing patterns. By studying how Balance Of Power was revealing large lot activity, it became obvious that this indicator was truly remarkable and was becoming a critical indicator for tracking the now hidden large lot transactions.

Since it was no longer possible to see the large lots from market maker limit order books, and since the giant funds succeeded at their goal to not disturb Price while buying millions of shares of stock over a set period of time, Balance Of Power just got better and better at revealing where the giant lots were buying and selling. Price and Price indicators were often conflicting with the Balance Of Power hybrid stock indicator, but invariably that contradiction was an early warning that Dark Pools were selling while smaller lots were pushing price up after a High Frequency Trader HFT Volume spike. Price indicators were often confirming an entry or exit that was contrary to the giant lot activity and time and again, Balance Of Power proved to be right and Price indicators proved to be giving false entry and false exit signals.

The Balance Of Power hybrid stock indicator requires an understanding of how to read it properly. It is not “red” in distribution and “green” in accumulation anymore. The indicator has evolved far beyond what the Don Worden originally intended. It has new patterns that reveal not only that large lots are buying or selling but also whether it is giant lots or smaller funds, whether it is HFTs, or whether it is Professional traders speculation.

Related Article: TechniTrader custom scans and chart layouts. How to interpret, read, and use TC2000 Indicators. Trading tools and support. Click HERE

Shift of Sentiment™ is one of the newer patterns that has become a very useful pattern for identifying tops and bottoms, long before momentum price action completes a bottom or a top. This allows Swing and Day traders the ability to plan and prepare ahead of time for sudden velocity and momentum price action.

Slow and steady Quiet Accumulation Patterns on the Balance Of Power hybrid stock indicator help Position Traders and Long Term Investors recognize how the giant funds are continuing a steady buying pattern that will sustain the uptrend over time. Often this pattern accompanies Platform Market Conditions which are so common nowadays. In addition rotation patterns on Balance of Power help those who own big blue chip stocks understand why their stock is moving sideways.

Summary

Since the Dark Pools control such a vast amount of the money invested in stocks, being able to accurately identify what stocks they are buying or selling is very important.

Most retail traders are still using MACD, which is the favorite indicator HFTs use against the retail crowd. There are dozens of HFT strategies using MACD to trade against the hundreds of thousands of retail traders, who still use MACD as an entry signal pattern.

By incorporating the Balance Of Power hybrid stock indicator into your indicator tool kit, you will discover a whole new approach to stock analysis that takes you to a professional level of Technical Analysis.

Go to the TC2000 Learning Center and watch webinars on Time Segmented Volume, Balance of Power, Professional Style TC2000 Scans, and the Trade Management Planner.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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