How to Take Advantage of High Frequency Trader Algorithms

7 Tips for Entering Stocks Ahead of Them

The important Buy Side Institutions are not front-run or affected by High Frequency Trader (HFT) algorithms because they use Dark Pools which are non-transparent order systems that do not display until AFTER the order is filled. Consequently, HFT algorithms cannot see the orders of these giant Mutual and Pension Fund Institutions.

Proprietary Desk Traders are those traders who work for the Sell Side Institutions to make money for their employers, which are the big banks and financial services companies as well as hedge funds, and they are not usually front-run by HFT algorithms either.

What seems to be a problem is that the general public believes that High Frequency Traders are real human beings. The news media makes little attempt to clarify that High Frequency Traders are computer algorithms and not human floor traders. There is no one sitting at the other end of the high-speed fiber-optic line waiting for the orders to flash by. It is a computer program searching among billions of orders for “Cluster Orders”. There are no people watching the algorithm orders, no floor traders monitoring order flow, and nobody is watching the computer monitor screens.

The following are 7 Tips for How to Take Advantage of High Frequency Trader Algorithms’ order flow and avoid being included in “Cluster Orders”:

  1. High Frequency Trader action that has huge gains with huge stock Volume on a daily chart are one-day events. Rarely do the HFT algorithms trigger the next day.
  2. Learn to identify the setups that precede High Frequency Trader huge price action the following day. These are compression candlestick patterns out of Platforms and Consolidations after Buy Side Institutions using Dark Pools have ceased accumulating. The goal is to get in ahead of the one-day event.
  3. Gaps as well as long one-day run candlesticks form on the stock chart. So, it is critical to identify when the Buy Side Institutions using Dark Pools have stopped their accumulation at a particular level so you can prepare to enter before the news “leaks” out to the High Frequency Trading Firms.

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Trade Wisely,

Martha Stokes CMT

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

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