Tuesday, July 30, 2013

HFT Price and Volume Patterns


MetaStock SPRS Series - Week 130 - TechniTrader® Stock Discussion for MetaStock Users - HFT Price and Volume Patterns - August 2, 2013
By: Martha Stokes C.M.T.

 
We have been studying the High Frequency Trading price and volume patterns in the last few discussions. High Frequency Trading orders are triggered primarily on news during earnings season. These low latency high speed trading platforms often cause big gaps that seem to have no predictability.

However when Relational Analysis™ is applied to the Price, Volume Bars, and TechniTrader Quiet Accumulation TTQA then patterns are revealed, that are difficult or impossible to detect with just price and price indicators alone.


If you were to just use price and price based indicators all you would see is a very choppy sideways pattern that whipsaws swing and momentum traders frequently causing losses on trades. MACD is a price momentum indicator that fails dismally when charts have this new type of sideways pattern called a "Platform." The platform is a very specific type of sideways pattern that first started forming in 2005 and has become increasingly more common as more and more giant and large funds use Dark Pool ATS.

To be able to anticipate what price is going to do and when it is most likely to trigger HFT orders that run and gap hugely, it is imperative that volume and quiet accumulation indicators be used.


What volume and TTQA show is that there was quiet accumulation going on in this stock that created the Platform sideways pattern. HFTs gapped the stock up as the Dark Pool quiet accumulation ceased and smaller funds chased the HFTs. During the next platform Dark Pools returned quietly adding to their holdings. Several attempts to sell the stock down created a flurry of smaller funds dumping this stock. Notice how TTQA diverges from volume and that most of the Volume is green during the red TTQA period. This exposes Dark Pools buying once again. Subsequently the sell down fails because the giant funds are buying, while smaller lots are trying to sell short against the huge lot buy orders. The compression pattern just prior to the gap up, along with the fading TTQA angling up, and lack of sell side volume all point to HFT trigger opportunity.

The stock gaps as HFTs automated orders react to the Dark Pool buying earlier.

Being on the right side of the trade requires that you not only use price indicators but that you also use volume indicators, that not only show volume action but also large lot versus small lot activity.

These indicators are more sophisticated as they are the new TechniTrader® Hybrid Indicators™ but learning to use them will dramatically improve your trading results.

Trade wisely,

Martha Stokes, C.M.T.
For more information email: info@technitrader.com
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
©2013 Decisions Unlimited, Inc.

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