It’s been an absolute mess of a market, and there are no signs of recovery yet. The coronavirus has crippled the global economy, and the U.S. is getting hit hard.
Of course, in times like these, we want to look for the best opportunities out there. So how exactly do I find them?
Well, I turn to the dark pools — the “secret” trading venues where the smart money place their trades. You see, these guys have access to an army of analysts, state of the art technology, and other resources to come up with their best trade ideas.
Especially in this market environment, I find it’s helpful to follow the smart money and try to figure out their moves.
So what exactly are Wall Street’s largest players doing right now, and what can we learn from them?
For those of you who don’t know, dark pools are private venues that only elite traders and investors have access to.
It’s no wonder why dark pools have become so popular amongst the Wall Street “insiders”.
Dark pools are somewhat transparent and they’re not like your traditional exchange.
When you send an order on NYSE or Nasdaq (these are considered “lit” exchanges), all the information is shown… it’s there for the public to see. The price and amount of shares you want to buy or sell are visible.
I’m not naive, so I know there is a lot of information these banks want to hide… and they don’t want the competition to figure out why they’re sizing up in a position.
The pros use dark pools because it allows them to operate in the shadows. Not only that, but they could automate their trading and use high-frequency trading (HFT)… so they could sit back and go about their days.
But the thing is, these fat cats don’t know there is technology out there following their every move, and oftentimes… it detects their massive trades — and many times, it’s AHEAD of a major headline.
That’s right, with the rise of dark pool trading activity… there’s been a bevy of perfectly timed trades.
There Are Hidden Clues In Dark Pool Information
We all know Wall Street “insiders” place well-informed bets using proprietary information all the time… I’m talking about non-public information that traders like you and I are not privy to.
So they do everything in their power to hide their trades… and dark pools have been one of the “best” places, so they think.
What the well-informed elite probably don’t know is even though their trades are anonymous on dark pools, traders can still figure out their every move. While it’s true we don’t know exactly who’s behind the massive block orders going off in dark pools every single day…
We can still figure out how many shares they want to buy and at what price.
However, in this market environment, I’ve noticed the block trade market for individual stocks has been dead for quite some time. And it’s not due to the fact I haven’t been looking for opportunities, as I’ve been sitting at my trading desk all day waiting for the right opportunity.
This clues me into the idea that nobody is thinking this is the time to jump back in and throw down large bets on single-stock trades. It makes a lot of sense with all the volatility in the environment. The last thing the smart money wants to do is lose money.
With that being said, cash is still the position for me… and I think it is for many of the smart money traders out there. Of course, things can change on a dime, but there’s a possibility of a potential market closure and trading activity could dry up.
Not only that, but NYC may go to shelter status, which could signal that Wall Street would have very little activity.
However, when things do start to take a turn for the better, I’ll be ready and stalking a proprietary block trade scanner that lets me know where the smart money are placing their bets.
If you want to learn more about the benefits of dark pool trading activity, click here to watch this exclusive trading lesson.