They Start Trading While Dark Pool Quiet Accumulation Continues
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.
See candlestick chart example below.
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 HFT gap or run up. High Frequency Traders HFT 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 HFT predatory systems discovering clusters of orders from Retail Traders who use Social Media Tweets and Twits to choose stocks. They also will use a “most popular stocks list” from charting software companies and brokerage firms. Both of these methods of choosing stocks adds additional risk to the trade. When there are sufficient numbers of Cluster Orders from Retail Traders, High Frequency Traders HFT automatically trigger, gapping or running the stock up within the first minute of the day.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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