TechniTrader "Use Dark Pool Chart Patterns for Higher Profits" by Martha Stokes CMT

Calculate the Cost of Trading when Determining Profits


To use Dark Pools Chart Patterns for higher profits, is an area of Technical Analysis that has not made its way into most stock market books, articles, and information available on the internet. The reason why Dark Pool technical patterns aka footprints are not yet part of the Technical Analysis standard of teaching, is that these are NEW chart candlestick patterns.

Dark Pools did not exist in the 1980’s, 1990’s, or early 2000’s decades. These are relatively new trading venues for the giant Institutions who demanded obscurity, due to the rise of the High Frequency Trading Firms in the mid 2000 decade after the switch from fractions to decimals. Basically High Frequency Trading Firms morphed out of the Small Order Execution System Bandits, during the rouge Floor Traders era.

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Nearly all large and giant lots are transacted nowadays on the hidden Alternative Trading System venues called Dark Pools, which are used by giant Institutions. However what can not be hidden, is their easy to identify candlestick footprints on stock charts.
There are many different types of Dark Pool footprints that the giant Institutions leave on charts, due to their preferred professional order types.

One of the more common candlestick footprints happening is the “Basing Bottom Formation,” which is a brand new type of bottom. In order to use Dark Pool Chart Patterns for higher profits, the key element in this pattern is to identify the Dark Pool Quiet Accumulation and enter early before the stock runs up.

See a chart example below of a Basing Bottom Formation caused by Institutions buying using Dark Pools.
chart example with dark pool buy zones - technitrader

However, early entry can be problematic if a trader is using Price and Time Indicators, as well as both Momentum and Price Oscillators. You may get an early crossover, but then the stock moves sideways up and down in a choppy pattern which causes whipsaw exits and losses. 

Another problem getting in early is that many Retail Traders wait and wait for signals from Momentum Indicators, which gets them into the stock very late in the run. This means instead of a high profit trade, the Retail Trader takes a meager profit. The Retail Traders Market Participant Group includes those who have learned to trade from home.


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True profit is one big part of trading that most Retail Traders fail to include in their profit evaluation. How to calculate the true cost of your trading is considering more than just the cost of Charting Software, Broker fees and charges, and possibly subscriptions to Newsletters.
To accurately calculate whether a trade is profitable or not, you must also include ALL of the normal business expenses for Trading as a Business. 

Trading as a Business includes the following:

1. You MUST pay yourself something for your time. How much could you make an hour, working for a corporation in your field of expertise or your degree? That is the minimum amount you should use as a base for trading expense as an hourly wage.

2. You must also include the average losses. You must take an average of your losses each month and divide it into your trades per month, and subtract that loss from your profits of every profitable trade.

3. Other expenses include your computer, printer, and other hardware depreciation. 

4. In addition there is the office space in your home, electricity, internet, phone, and office expenses such as paper, pens, and journals. 

5. Finally add up the cost of time attending webinars, the reading articles, and also if you pay a paper trading simulator fee.

Summary

If you did an accurate calculation of your true trading costs, you would find that taking a .25 cent profit on a 100-1000 share trade is not at all profitable. You are actuality losing money every time you trade. So learning how to enter a stock trade earlier based on recognizing a Dark Pool Buy Zone™ is crucial, and can turn your trading into a career.

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Followers may request a specific article topic for this blog by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2016-2017 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.
Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only. 

TechniTrader Beginner Education "New Bottoming Formations in the Stock Market" by Martha Stokes CMT

Dark Pool Quiet Accumulation Builds Bottoms

During Trading Range Market Conditions when several industries are in their own Bear Market while other industries are continuing a Bull Market, determining when a stock has reached a final low or near the final low is critical for Swing Traders. They typically will be selling short into a bottom and then switching to buying long with Momentum Trading, as a stock hits the final low and moves with momentum or velocity action out of the extreme low in one of the new bottoming formations in the Stock Market. 

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One factor that Technical and Retail Traders need to recognize is the dominant influence of the Dark Pools, which build bottoms with Quiet Accumulation. Often times their patterns are hidden from Retail Traders using older style indicators such as MACD, Stochastic, and Average True Range ATR. By incorporating a few Leading Hybrid Indicators, Retail Traders can see what Professional Traders see in Quantity Analysis.

The chart example below is an excellent example of price trending down and then starting a base. 
chart example of price trading down and then starting a base - technitrader
The new Basing Bottoming Formation begins after a big gap down caused by High Frequency Trading. The High Frequency Trading volume is easy to identify on daily view charts so long as the Volume Bars are not truncated. This high volume appears twice as High Frequency Traders gap the stock and run it down, but immediately the stock forms a Hurdle Candlestick Pattern reversal signal.

Unknown to the High Frequency Traders which are computer triggered millisecond orders, this stock dropped into a Dark Pool Buy Zone™ which then triggered giant Institutional Time Weighted Average Price style orders. These types of orders buy into a stock incrementally, maintaining a bracketed price range and minimizing the impact of their buying on Volume and Price.

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TechniTrader Quiet Accumulation TTQA is designed to track Dark Pool accumulation, distribution, and rotation patterns as it determines which side of the trade the large lot triggered. 
Although this stock base has a low of 75.0 it drops slightly further, as accumulation eases ahead of the earnings season as is typical for Dark Pool accumulation patterns in a new bottoming formation.

Then a huge white candle forms. Intraday shows End of Day Professional Traders moving in ahead of news, and High Frequency Traders triggering after market opens. This pushed price back up to near the high of the Buy Zone for the Dark Pools. Now the stock is consolidating due to giant Institutions using Dark Pools and controlling price as they accumulate more shares.

Summary

It is no longer enough just to see a crossover or candle signal to enter a stock. With 80% of all activity on the professional side, understanding who is controlling price helps Retail Traders prepare for how price will behave in the near term.

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In this instance, it was important to recognize the underlying influence on price by the giant Institutions using Dark Pools who controlled price as they accumulated creating a new bottoming formation. By recognizing the Dark Pools footprint Traders can be ready for the sudden Shift of Sentiment™ on the TTQA indicator for the Professional Traders buying, that often precedes a huge run or gap caused by High Frequency Traders trigger orders. This allows for more accurate entries and more consistent trading results.

Retail Traders need to learn the NEW Bottoming Formations in the Stock Market, how to use Leading Indicators based on quantity and lot size, and the new Shift of Sentiment candlestick patterns that reveal who is controlling price. Price behaves totally different when various Market Participant Groups are in control and dominating price action, for example Dark Pools rarely move price much.

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a wide variety of webinars, to experience for yourself the excellence of TechniTrader education.
Go to the TechniTrader

 
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Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT


TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2016-2017 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.
Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.