Platform Market Conditions

Understanding How to Recognize the Pattern and Profit 

Shortly after the change from fractions to decimals and the advent of high frequency trading companies, Dark Pool Venues became popular with the largest institutions both Mutual Funds and Pension Funds. These are both BUY SIDE Institutions which is extremely important to note nowadays, as the Buy Side is taking over the dominant position for the inner circle of the Market Participant Groups. That dominant position had been held by the SELL SIDE Institutions until recently.

The term refers to the fact that these trading venues are not lit, or are “dark” in terms of the ability for all traders from all 9 Market Participant Groups to see their orders in the queues via the Market Maker books.

Dark Pools are now the most important Market Participant Group for Technical and Retail Traders to learn to trade with, as they move millions of shares of stock beyond the lit exchanges. Because of the types of orders Dark Pools use, and the exotic routing systems available exclusively to Dark Pool venues, these giant lots create specific technical patterns that expose their presence.

Platform Market Conditions did not exist prior to 2002, and became an established pattern in 2005. Therefore most Retail Traders have never heard of this Market Condition.

The Platform is a sideways candlestick pattern that is extremely precise, controlled at the low and the high of the range by Time Weighted Average Price TWAP orders which are multi-legged stock orders often tying several instruments together. 

As an example, if a Dark Pool decided to buy 3 million shares of a stock over a 2 week period of time, the order would also include Buy Put Option orders purchased at the same time as an insurance policy. This is a common usage of the TWAP complex multi-leg order.

For Technical and Retail Traders, learning to identify the Platform candlestick pattern is important because Platforms constrain price for weeks to months, while drawing liquidity slowly but steadily which creates underlying energy that breaks to the upside in the Platform Market Condition.

Accumulation is often the term used for this type of order, however it is also employed by the huge trading floors most giant funds have for trading short-term as well.

The “Rule of 3” for Mutual Funds once limited the short-term activity of huge Mutual Funds, but that rule has been gone since the late 1990’s, and giant funds can and do at times trade huge lots short-term. The problem for Technical and Retail Traders is that they cannot see this activity, and it does not show up during open market orders on exchanges or intraday charts. Dark Pools are permitted to delay their orders to the National Clearing Houses until after the market is closed OR pre-market.

The chart example below is a stock that has been building a Platform, that just broke out to the upside.

qualcomm chart example with a building platform that broke out to the upside - technitrader

This type of run often surprises Retail Traders who then attempt to chase the run, rather than entering before the run. This is an excellent one day run for Day or Swing Traders. This stock example offered an excellent, easy entry, and was an excellent run. Most Retail Traders do not recognize the Platform pattern, and have no idea how to recognize the Dark Pool Buy Zones™ range. Properly recognizing Platforms and Buy Zones requires using indicators based on both Volume AND Price patterns. What defines the Platform is the control of price and the leading qualities of the Volume indicators. I call this Relational Analysis™ and it is far superior to Technical Analysis, which just focuses on Price and price indicators.

Summary

Why do these patterns breakout with such huge Volume and Price surges? It is because after the giant Funds have purchased all the stock they want, they “leak” out news that they have been acquiring the stock. This triggers High Frequency Trading HFTs algorithms on the inner circle news, OR Professional Traders using their proprietary custom indicators. They discover the liquidity draw and quickly jump into the stock, ahead of the HFTs which trigger the high frequency trading altos.

These are usually ONE day events. Learning to recognize Platform Market Conditions and then using the Platform Candlestick Patterns for an entry, allows for higher profits with lower risk.

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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com


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

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