HFTs gaps: Learn how to enter a stock before a huge gap up.High Frequency Trading companies are market makers/takers that provide liquidity for the public exchanges, and they now use AI. HFTs have a huge impact on your profitability. You can make higher profits from trading ahead of the HFT gaps and riding the momentum upward or downward.
In this short video, you'll learn some basics on how to identify the patterns that precede HFT gaps, which I call Pro Trader Nudges . Learn what to look for in Volume patterns and pre-gap price action.
Make sure you are not chasing HFTs but riding the wave of momentum they create, just like professional traders do.
Highfrequencytrading
$AMZN: Fast Rebounds Reveal Fundamental Support LevelThe new technologies that Amazon is embracing, including robots/robotics, and a brilliant CEO keep this huge company moving forward.
The HFT-driven gap down in August was massive but the rebound was fast. This isn't the first time the stock has moved right back up to its prior quarter's fundamental support range, aka Dark Pool Buy Zone.
Now, NASDAQ:AMZN is slightly above that range to challenge the July high. A stock to watch ahead of its earnings report October 24th.
e-Learning with the TradingMasteryHub - Sentiment Analysis**🚀 Welcome to the TradingMasteryHub Education Series! 📚**
Are you looking to level up your trading game? Join us for the next 10 lessons as we dive deep into essential trading concepts that will help you grow your knowledge and sharpen your skills. Whether you're a beginner or looking to refine your strategy, these lessons are designed to guide you on your journey to better understand the markets.
**📊 What is Sentiment Analysis?**
Sentiment analysis gauges the mood of market participants towards an asset or the entire market. By analyzing news, social media, and financial reports, you can determine whether the sentiment is bullish, bearish, or neutral, helping you anticipate market moves.
**👥 Who Are the Most Important Market Participants?**
The market is shaped by various players: Retail traders, institutional investors, market makers, central banks, high-frequency traders, and arbitrageurs. Each plays a crucial role in price movements and market efficiency.
**📈 Why Does Sentiment Matter?**
Sentiment drives market behavior. Understanding it allows you to anticipate trends, avoid potential pitfalls, and make informed decisions before significant market moves.
**🔍 How to Read the Market Sentiment?**
Analyze news headlines, social media, market indices like the VIX, and sentiment indicators like the Put/Call Ratio to get a comprehensive view of market sentiment.
**🎯 The Right Indicator**
Selecting the right sentiment indicator depends on your trading focus. Use tools like the Bullish Percent Index, AAII Sentiment Survey, and VIX to gain deeper insights.
--> ❤️ I love the sentiment indicator by Dreatblitz: Bull Bear Power Trend (BBPT) - I use it to find divergences in price and emotional trends.
**👍 Pros and Cons of Sentiment Analysis**
**Pros:** Anticipate market moves, identify overbought/oversold conditions, and complement other analyses.
**Cons:** It can be subjective, rapidly change, and sometimes lead to irrational market behavior.
**🔚 Conclusion and Recommendation**
Sentiment analysis is a powerful tool in your trading arsenal. Combine it with technical and fundamental analysis for the best results, and always prioritize risk management. With practice, you'll become adept at reading market sentiment and using it to your advantage.
**🔥 Can’t get enough? Don't Miss Out!**
Subscribe, share, and engage with us in the comments. This is the start of a supportive trading community—built by traders, for traders! 🚀 Join us on the journey to market mastery, where we grow, learn, and succeed together. 💪
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- The fundamentals of trading
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Best wishes,
TradingMasteryHub
Swing Trading Setups: TWSTThis is a stock that went on my students' watchlists this week for potential swing trading.
NASDAQ:TWST is coming out of a long-term down-trending correction and has completed the bottom. Accumulation ended and a HFT gap and run up followed on May 3rd. The stock retested the sideways trend highs which are now support for the current price.
Pro traders are swing trading in these patterns. There are fewer wicks and tails and the stock has a very high Percentage of Shares Held by Institutions.
NTCT: Island Gap PotentialThere is an interesting phenomenon that occurs often: when a gap down of this size occurs, followed by a bottoming action and a large white candle forms, this often becomes an island gap. HFTs that gapped the stock down gap it up again.
The fact that the gap down candle is a huge white candle for this chart indicates that the gap down is below fundamental values and Dark Pools were the buyers against the HFT selling. The drop in Accumulation/Distribution at that time was smaller funds dumping which often triggers Dark Pool TWAPs. NASDAQ:NTCT has a high Percentage of Institutional Holdings at this time and it's a lower-priced stock in a pricey market.
Controlled Sideways Trends Ahead of EarningsThe Giant Banks and Credit Card companies benefit the most from the Federal Reserve Board's overnight interest rate hikes. As the FRB increases its lending rate, it allows big banks and credit companies to increase their interest rates to consumers, small businesses, etc. That usually means higher revenues.
NYSE:V is in a sideways trend that is not as consistent as would be ideal ahead of its earnings report in about 3 weeks. However, HFTs are aware of the tendency for credit card companies to prosper during high interest-rate markets.
Study the candlestick patterns: Note the quick reversal back down after a higher price level was reached. Note the rebound the same day when price dropped out of the lows of this sideways trend. There is control in this pattern which is typical of Professional trading activity.
Understanding the Role of HFTs and Dark Pools for Day TradingNASDAQ:TSLA reports on Wednesday of this week, October 18th. Last quarter, it had a gap down on its earnings news based on Year over Year comparisons which triggered High Frequency Trading (HFTs) to gap the stock down. Quarter over Quarter, however, NASDAQ:TSLA has shown consistent growth this year.
The problem with determining if the HFT gaps are likely to gap down or up on the next earnings report is the very low Percentage of Shares Held by Giant Buy-Side Institutions (PSHI). TSLA’s CEO has lost the necessary confidence of the largest Buy-Side Institutions in the world. So it's institutional interest is extremely low for such an important US company. The Buy-Side Institutions want the Board of Directors to replace Musk with someone who is more focused on TSLA to help it grow. The PSHI is likely to remain low until a new CEO is chosen.
The highest the PSHI has ever been was in July 2020 when it reached a high of 71%. It dropped to a low of 43% in November of 2021 and the stock has been sideways with very low PSHI ever since. It is very rare to see such low PSHI in a young new technology company with such high growth potential.
With less support from largest most influential institutions, the HFTs, which use retail news as one of their 6 primary algorithm triggers for automated orders as Maker/Takers, often gap a stock down on earnings news that was actually not negative.
Smaller Fund Managers, who have a special SEC classification with lower reporting requirements, often have VWAP automated orders trigger on high volume surges. This is often mistaken by smaller funds and retail investors or traders as “Dark Pool high volume activity,” when it is not.
High PSHI creates a natural liquidity draw and thus more momentum and speculative price action. This is missing much of the time for NASDAQ:TSLA stock price movement.
The current sideways trend has existed since 2021, best seen on a Weekly Chart. The dimensions of the sideways trend and the irregularity of the price range determines whether the sideways trend is a Long Term Wide Trading Range, a Short Term Trading Range, a Wide Sideways Trend, or a Platform-Building Sideways Trend. This is a Long Term Trading Range due to the inconsistent highs and lows.
This is common in a stock that has PSHI below 60%.
On a Daily Chart, the fundamentals currently are within the rectangular shape outlined below. This area of price can be problematic for retail day traders as there are always portfolio adjustments going on by the Buy-Side Institutions who have ETFs and Index funds with TSLA as a component.
When the stock drops below that Buy Zone range, it quickly reverses and runs up into the lows of that fundamental range. This becomes a price range where there is conflict between retail day traders trying to trade on news and the Buy-Side Institutions accumulating inventory shares of TSLA for the Indexes or ETF Trust accounts that must maintain a value close to the ETF or index value upon which that ETF is based.
What happens intraday is a very choppy and indecisive price action up and down that causes whipsaw losses for day trading.
In order to successfully day-trade TSLA, these factors must be understood to use to one's advantage. This requires an understanding of how to identify a Dark Pool Sell Zone or a Dark Pool Buy Zone within the daily charts. It also requires an understanding of how HFTs trigger and how VWAP orders often cause whipsaw action as well.
Remember that Dark Pool data is not available during the trading day. That data is on Over-the-Counter Alternative Transaction Systems. Those orders are filled off the exchanges and are not transmitted to the National Clearing Houses until after the market closes.
Hence, ALL retail day traders are trading against an invisible entity whose orders they can’t see even on Level 2 screens. The art of day trading in harmony with Dark Pool activity requires what I call "Relational Technical Analysis."
High-Frequency Trading: Deep Dive into its Multifaceted ImpactIntroduction
High-Frequency Trading (HFT) is often depicted as the epitome of technological advancements in the financial sector. As an ultra-fast trading method, HFT employs sophisticated algorithms and high-speed data networks to execute countless trades in milliseconds. While HFT accounts for a significant portion of daily trading volumes globally, its implications, both positive and negative, are intricate and multifaceted.
Historical Background
Before delving into the complexities of HFT, it's essential to understand its historical roots. Initially emerging in the late 1990s and early 2000s, HFT rose as electronic exchanges became prevalent. The rapid decline in trade execution costs and the simultaneous explosion of computational capabilities allowed trading firms to explore this new frontier.
The Mechanics of High-Frequency Trading
At its core, HFT systems continuously monitor multiple exchanges and asset classes, seeking tiny, often fleeting, arbitrage opportunities. Using predictive analytics and complex algorithms, HFT can detect and exploit price discrepancies faster than any human trader.
Example :
If HFT systems notice a stock is priced at $50.00 on Exchange A but $50.01 on Exchange B, they can buy from A and sell on B, making a micro-profit. When scaled to millions of trades daily, these profits become significant.
The Advantages
1. Increased Market Liquidity:
HFT systems, constantly executing buy and sell orders, lead to increased trading volume, offering more liquidity in the market.
2. Reduced Bid-Ask Spreads:
The continuous flow of orders often results in narrower bid-ask spreads, which can lead to minimal trading costs for the average investor.
3. Immediate Price Adjustments:
HFT's speed means financial markets can adjust and react to news instantly, leading to more accurate pricing of assets.
4. Profits and Innovations in the Financial Sector:
Leading HFT firms often pour their substantial profits back into research and development, advancing trading technologies even further.
The Shortcomings
1. Systemic Risks:
The speed at which HFT operates means that errors, either in judgment or technology, can amplify across the financial system rapidly.
2. Market Manipulation Concerns:
Some argue that HFT allows for dubious strategies like "quote stuffing" or "layering," where traders flood the market with orders they have no intention of filling, creating false signals.
3. Unequal Playing Field:
HFT firms often have access to better technology and data feeds than the average trader, leading to concerns of inequality.
4. Flash Crashes:
High-speed trading can exacerbate market volatility, leading to sudden and severe "flash crashes."
Notable Events
The Flash Crash of 2010:
On May 6, 2010, U.S. financial markets saw a rapid decline and recovery, with some stocks momentarily losing almost their entire value. While the exact cause remains debated, HFT is often cited as a contributing factor.
Knight Capital Catastrophe:
In August 2012, a software glitch in Knight Capital's HFT system executed a multitude of unintended trades, causing a loss of $440 million in mere hours and nearly bankrupting the firm.
Regulatory Challenges
The rise of HFT has posed significant challenges for regulators worldwide. Traditional market oversight mechanisms often struggle to keep pace with the sheer speed and volume of high-frequency trades. Regulators grapple with striking a balance between fostering innovation and ensuring market fairness and stability.
The Future of HFT
With technological advancements showing no signs of slowing down, the future landscape of HFT is poised for further evolution. Machine learning and artificial intelligence are increasingly being integrated into trading algorithms, offering even faster and more accurate trade executions.
However, with these advancements come renewed challenges and concerns. The integration of AI into HFT could potentially lead to unforeseen market behaviors and complexities.
Conclusion
High-Frequency Trading stands at the crossroads of technology, finance, ethics, and regulation. Its undeniable impact on market liquidity and efficiency is juxtaposed with concerns about fairness, stability, and systemic risk. As we venture further into the digital age, the role and ramifications of HFT in global financial markets will undoubtedly remain a focal point of discussions, debates, and decisions for industry stakeholders and regulators alike.
HFT: Benefits, Controversies, and Technological AdvancementsIntroduction
High-Frequency Trading (HFT) is a sophisticated trading strategy that utilizes powerful technology and algorithms to execute a substantial number of trades within fractions of seconds. While HFT has revolutionized the financial markets and brought numerous benefits, it has also stirred controversies due to its potential impact on market stability and fairness. In this article, we will explore the benefits of HFT, delve into the controversies it has sparked, and examine how advanced technology enables this lightning-fast trading approach.
The Benefits of High-Frequency Trading
a. Enhanced Liquidity: One of the primary advantages of HFT is its contribution to market liquidity. HFT firms frequently provide liquidity by being both buyers and sellers in the market, narrowing bid-ask spreads and ensuring smoother price discovery.
b. Reduced Transaction Costs: The competitive nature of HFT leads to lower transaction costs for all market participants. This translates to cost savings for retail investors, institutional traders, and other market participants.
c. Efficient Price Discovery: HFT's rapid trading enables the market to react quickly to new information, leading to more efficient price discovery and reducing information asymmetry among market participants.
d. Market Efficiency: High-frequency traders help bridge the gap between different trading venues and ensure prices remain aligned, promoting overall market efficiency.
Controversies Surrounding High-Frequency Trading
a. Market Instability: Critics argue that HFT's ultra-fast trading can exacerbate market volatility, leading to abrupt price swings and destabilizing market conditions.
b. Unfair Advantage: HFT firms, with their advanced technology and proximity to trading servers, gain an unfair advantage over traditional investors and retail traders, leading to an uneven playing field.
c. Flash Crashes: HFT has been implicated in certain flash crash events where a sudden and severe market downturn occurs in a matter of minutes. Critics claim that HFT's aggressive strategies may contribute to these incidents.
d. Regulatory Challenges: Regulators struggle to keep pace with the rapidly evolving HFT landscape, leading to concerns about potential market manipulation and inadequate oversight.
Leveraging Technology for High-Frequency Trading
a. Low-Latency Trading Infrastructure: HFT firms invest heavily in low-latency trading infrastructure, such as proximity hosting and direct market access, to minimize communication delays and execute trades swiftly.
b. Advanced Algorithms: Complex algorithms form the backbone of HFT strategies. These algorithms analyze market data, identify patterns, and make split-second decisions on trade execution.
c. Co-location Services: HFT firms often lease space near exchange servers to reduce network latency further. Co-location allows them to place their trading servers in close proximity to the exchange, gaining a speed advantage.
d. Colossal Data Processing: High-frequency traders process enormous amounts of market data in real time to execute trades with precise timing and efficiency.
Regulatory Efforts and Future Outlook
In response to concerns surrounding HFT, regulators worldwide have been working to implement rules and controls aimed at maintaining market integrity and reducing the risk of disruptive events. Measures such as circuit breakers, minimum resting periods, and market-making obligations have been introduced to mitigate potential negative impacts.
The future of HFT remains promising, with ongoing technological advancements driving the industry forward. Machine learning, artificial intelligence, and big data analytics are revolutionizing trading strategies and contributing to even faster decision-making.
Conclusion
High-Frequency Trading has undoubtedly transformed the financial landscape, introducing benefits like enhanced liquidity, efficient price discovery, and reduced transaction costs. However, its lightning-fast pace and perceived unfair advantages have sparked controversies and regulatory challenges. As technology continues to evolve, the future of HFT will likely see further innovations and improvements, but it will also require careful monitoring and oversight to ensure fair and stable markets for all participants.
BKNG: Hidden Accumulation CuesThe big season for vacations starts this week as schools close, graduations begin, weddings increase, and families plan big vacations this year.
BKNG has had HFTs attempting to sell it down several times but it holds within a sideways trend still. This implies hidden accumulation.
If it breaks to the upside, then this sideways trend becomes support.
BKNG must do as all other high-priced stocks have done: do a big split to lower the share price to $100 - 300. When the Board does so, the stock has more potential for runs up rather than down.
JPM Earnings Reversal PatternJPMorgan Chase (JPM) reported earnings today for the 4th quarter. There was no surprise for the professionals and for the Dark Pool Buy Side Institutions. They already knew what the numbers would be.
Today's candle was not just a bullish engulfing candle. It is what we, at TechniTrader, call a major fundamental REVERSAL candlestick pattern.
This is a huge one-day reversal that started out as a High Frequency Trader (HFT) gap down on negative expectations from the retail side and social media telling traders to sell short JPM. Those retail day traders who tried to sell short JPM got whacked big-time. Margin calls are likely, as the sell short losses on this large of a reversal candle are huge.
Why did the stock price reverse so quickly? The outlined area of the sideways consolidation pattern reveals Professional Traders’ setups ahead of the earnings report. The stock dipped into this price level, and then buying commenced that is well above average for JPM stock.
BELEAVE in maryjane? The secret is out...Ramblings about a secret little stock I was trading and strategy on how I traded this stock. Penny flipping is not for everyone but when you find a stock that resonates the strategy, it can become fun and profitable...
UTX: Pros Set Up for Earnings Today While Dark Pools RotateUnited Technologies Corp Weekly Chart removes the white noise of the daily candlestick patterns, revealing a cleaner perspective of who controls price for this stock. UTX is bouncing up after hitting support levels AND with professional traders setting up for earnings news. The precision trading of the professionals is not impacted by the slow hidden rotation pattern revealed by the Accumulation/Distribution indicator on the weekly scale. As the stock price rose, large-lot Dark Pools sold (rotation), hiding their activity. The rotation is not about this report; those buying and selling adjustments occurred in November and December. This rotation is about the first quarter earnings report for 2019, which will come out in April. Dark Pools make decisions 1-3 months ahead of the earnings reports. Today UTX is reporting last year’s results, ancient history for the Dark Pools. The pro traders are gearing up for HFT action on this high-profile stock.
DE: Earnings Stock of the Day Deere & Company is one of the last to report earnings of the Dow 30 components today. High Frequency Trading firms (HFT) focus on blue chip earnings reports. DE is holding above the topping completion level for now but remains in a volatile trading range. All black lines on this weekly chart were drawn in the last quarter. Bounce support areas are defined in red.
Although farm and construction equipment (mostly construction equipment) has been in high demand over the past couple of years as the US economy enjoyed its final expansion mode, that demand has declined since early this year. Deere is dependent upon construction cycles. Construction Cycles are dependent on the Real Estate Cycle, which is trending down to trough. Many real estate companies are finding it very hard to unload inventories of homes and commercial properties.
