MetaStock SPRS Series - Week 107 - TechniTrader® Stock Discussion for MetaStock Users - Market Dynamics 2013 - HFTs in Focus - February 25, 2013
By: Martha Stokes C.M.T.
By: Martha Stokes C.M.T.
The financial markets are undergoing dramatic changes right now that most retail traders are totally unaware of, and this can be hazardous to your profits.
The dominance of High Frequency Trader activity during the earnings season in January and February, continues to frustrate many retail traders who are unable to take advantage of these huge price gains.
Some retail traders used the older style earnings strategy which is to “exit before the news event,” and watched as their stock picks gapped and ran hugely while they were sidelined.
This is one area that most traders who use intraday, day, and swing trading styles need to really focus on understanding.
HFTs are algorithmic trading that are all computer generated orders with no human involved. The trigger occurs automatically and orders are routed on the millisecond scale. These high volume trades are often smaller lots than the Dark Pools use, and create a flurry of activity from smaller lot retail traders and smaller funds who chase the HFT action only to get whipsawed out of a trade or lose money.
The goal should always be to enter the stock prior to the HFT action. The question for most retail traders is how do you do that if you don’t know where the HFTs are going to trigger next?
Understanding HFT action starts by realizing you have all the tools you need right in your MetaStock Charting Software to track these super speed trades.
HFTs as a computer program are not going to behave like a human trader. The parameters are going to be narrow, and the trading patterns remarkably consistent from one stock to the next.
As an example, HFTs tend to create exhaustion volume patterns in one day. Their volumes are so huge that it creates extreme volume surges on the Volume Bars. Seldom do HFTs trade the same stock the next day. They are in and out within one day or less.
Also, nearly all HFT action is preceded by a compression pattern after the Dark Pools have bought all the stock they intend to buy. Track the Dark Pools and you will find HFTs following a few days later on. This allows you to plan your entry rather than chasing HFT action.
Many retail traders consider HFTs or Dark Pools to be their nemesis, but the opposite is true. Algorithmic trading creates consistent reliable patterns that occur over and over again. Whenever that happens, stock charts reveal these patterns. Using you MetaStock Charts to find HFT action before it occurs requires that you focus less on price and time indicators and more on volume indicators, volume oscillators, volume large lot indicators.
Trade wisely,
Martha Stokes, C.M.T.
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.
Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.
The dominance of High Frequency Trader activity during the earnings season in January and February, continues to frustrate many retail traders who are unable to take advantage of these huge price gains.
Some retail traders used the older style earnings strategy which is to “exit before the news event,” and watched as their stock picks gapped and ran hugely while they were sidelined.
This is one area that most traders who use intraday, day, and swing trading styles need to really focus on understanding.
HFTs are algorithmic trading that are all computer generated orders with no human involved. The trigger occurs automatically and orders are routed on the millisecond scale. These high volume trades are often smaller lots than the Dark Pools use, and create a flurry of activity from smaller lot retail traders and smaller funds who chase the HFT action only to get whipsawed out of a trade or lose money.
The goal should always be to enter the stock prior to the HFT action. The question for most retail traders is how do you do that if you don’t know where the HFTs are going to trigger next?
Understanding HFT action starts by realizing you have all the tools you need right in your MetaStock Charting Software to track these super speed trades.
HFTs as a computer program are not going to behave like a human trader. The parameters are going to be narrow, and the trading patterns remarkably consistent from one stock to the next.
As an example, HFTs tend to create exhaustion volume patterns in one day. Their volumes are so huge that it creates extreme volume surges on the Volume Bars. Seldom do HFTs trade the same stock the next day. They are in and out within one day or less.
Also, nearly all HFT action is preceded by a compression pattern after the Dark Pools have bought all the stock they intend to buy. Track the Dark Pools and you will find HFTs following a few days later on. This allows you to plan your entry rather than chasing HFT action.
Many retail traders consider HFTs or Dark Pools to be their nemesis, but the opposite is true. Algorithmic trading creates consistent reliable patterns that occur over and over again. Whenever that happens, stock charts reveal these patterns. Using you MetaStock Charts to find HFT action before it occurs requires that you focus less on price and time indicators and more on volume indicators, volume oscillators, volume large lot indicators.
Trade wisely,
Martha Stokes, C.M.T.
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.
Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.
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