How to Use HFT Trigger Entries for Swing Trading
Identify Momentum Price Action Ahead of Runs
One of the most exasperating experiences for many StockCharts.com Users is to open their charts to find a stock that has run or gapped with momentum energy price action. These huge one-day gains occur when High Frequency Traders (HFTs) fill the queues ahead of market open. This forces the computer-automated Market Makers to gap or run the stock up at market open. See the red arrows in stock chart example #1 below.
In stock chart example #1 above, which is an Intraday View, the stock gapped at market open due to a huge flow of orders from High Frequency Traders. This caused the stock and volume as well as other stock Volume Indicators to go to vertical Angles of Ascent™. However, before this huge at open gap and run, price did not show what direction the stock would move next. It only showed that the stock was in a consolidation mode after a shallow retracement within a longer consolidation.
The stock Volume and Quantity Indicators revealed the underlying upside energy. The same stock chart example as chart #1 is shown below as stock chart example #2; however, it is a Daily View of the same chart. Quantity Indicators were showing upside breakout potential before the stock gapped. Recognizing that energy is building to the upside allows Swing Traders to plan and prepare earlier rather than trying to chase the stock once it has gapped.
It is difficult to chase High Frequency Traders’ runs and gaps with Day Trading as the stock gaps within seconds of the market open, and then profit taking occurs immediately. The whipsaw action within the first few minutes of the day often results in Retail Traders losing money on these types of gaps. The problem is not High Frequency Traders running the stock. The problem is the entry for the trade.
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Martha Stokes CMT
TechniTrader technical analysis using StockCharts charts, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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