How to Identify Professional Traders Footprints
During Earnings Season, most Retail Traders and Technical Traders are often frustrated because they do not have training on Earnings Strategies that work for their Trading Style. They hear about a stock or a great report and discover the stock gapped up hugely before they even heard about it. Another example is that they try to enter the stock with an overnight order, only to discover they have been caught up in a huge gap up followed by a run down due to Professional Trader profit taking.
There is a better way. If you know what to look for, many times, Earnings Runs have Professional Traders footprints in the chart before the huge High Frequency Trader gap or run up. High Frequency Traders front-run retail orders, as the Order Protection Rule requires that brokers post their customer orders. This rule was intended to protect the Retail Trader from their brokers taking advantage of their order with wider spreads.
However, it has added the additional risk of High Frequency Trader predatory systems discovering clusters of orders from Retail Traders who use Social Media Tweets and Twits to choose stocks. OR, they use a most popular stocks list from charting software companies and brokerage firms. Both add additional risk. When there are sufficient numbers of cluster orders from Retail Traders, High Frequency Traders automatically trigger, gapping or running the stock up within the first minute of the day.
The advantage StockCharts.com Users have is learning to read the charts to find the Professional Traders footprints before the High Frequency Traders gap that stock.
The chart below is a prime example of Professional Traders footprints clearly evident before the stock gaps on a High Frequency Trader volume spike. Professional Traders moved in after they discovered Dark Pool Quiet Accumulation, which is a liquidity draw that is sufficiently large enough that they are alerted and start trading while the accumulation continues.
Controlled bracketed orders maintain the level of price within a range for a while. Volume increases as more Professional Traders see the liquidity draw and move in ahead of news or High Frequency Trader gaps. By studying and using indicators designed to reveal Professional Traders activity, Retail Traders can enter a stock ahead of a huge gap or run and then take profits as the Professional Traders take profits and other Smaller Lots chase.
The chart example is a classic Dark Pool Quiet Accumulation before a Professional Traders pre-momentum run. Then, there is a High Frequency Trader gap with Smaller Funds and Retail Traders chasing in the end.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
Copyright ©2017-2019 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.