Dark Pools use precise controlled orders that trigger automatically over extended periods of time. Since the Buy Side Institutions using the Dark Pools are primarily buying for the long term, price can sometimes drop down before moving up. This tendency often leaves Retail Traders on the wrong side of the trade.
Using an indicator that exposes the Dark Pool incremental buying gives Retail Traders an edge even High Frequency Traders (HFTs) do not have. During this period, the stock slipped down slightly, but it remained well within the Dark Pool Buy Zone™ that had been created. Below is a chart example of a stock under Dark Pool Quiet Accumulation for several months.
The enormous stock Volume that occurred on the day of the High Frequency Traders’ gigantic gap up distorts the stock Volume Indicator history. Below is the chart showing how the stock Volume Indicator appeared prior to that big gap.
High Frequency Traders attempted to sell the stock down a couple of times, but Dark Pools were triggering buys during that period of time. Smaller Funds were following High Frequency Traders with Volume Weighted Average Price (VWAP) orders and often sold when they should have been holding. Smaller Funds Managers typically have less experience and rarely use individual stock Technical Analysis for their buys and sells.
The Drop Down Pole Vault Candlestick Pattern, which is one of the new candlestick patterns that form due to Dark Pools triggering on a sell down by High Frequency Traders, was the pattern Retail Traders needed to be able to recognize.
An ideal Springboard Candlestick Pattern formed for a good entry with low risk for Retail Traders. Then, the stock experienced several days of fast-running momentum and huge stock Volume spikes.
Oftentimes, Retail Traders who only learned a strategy and have been whipsawed out of trades sometimes develop a belief that setting a specific point gain for a brief hold period is lowering their risk.
Unfortunately, this strategy (which is very popular and taught in many areas of the internet) has two major problems, which are the following:
- The shorter the duration of the hold, the higher the risk factors.
- It limits your profits rather than letting a stock run as far as it will go.
Shorter-duration trades increase risk because if the stock goes against you, your limited hold takes you out at a loss. Limiting profits is foolish. Professional Traders know that excellent runs with fast-moving momentum should be allowed to run out with a stock Volume exhaustion pattern or extreme pattern. By allowing a stock to run its full and complete run, Professional Traders rode this stock up for huge profits in a few days. Meanwhile, most Retail Traders either exited too soon or even took a loss on an excellent trade that moved strongly.