Thinkorswim Dark Pool
Large trading volumes in any financial market have a significant impact on the market structure and cause the price to move in a certain direction. There are "secretly" traded chunks of shares on NYSE, NASDAQ, that are traded without making a noise, and the term used for them is dark pools.
If you would like to learn more about Dark Pools in general you can read about best free dark pool data here.
Smart traders know to follow the news, and chart patterns, along with these dark pools to make the most out of their trading.
Thinkorswim is one of the major platforms used for analysis and has a great indicator that can be used to keep a track of such trades.
Thinkorswim Dark Pool: Trade Flash
Trade flash is a function of Thinkorswim and shows you trades in real-time as they are happening in the markets. It flashes the block trades and events on the trading floors. And like other features on Thinkorswim, it can be displayed as a separate window on your screen, or the left panel of your chart.
These flashes are shown for a short time, and that is something that you need to be particularly careful about. If you are not on your toes, the flashes might disappear and you can miss out on a big opportunity in your trading day.
Trade Flash is a useful tool if used correctly. A few things that you should know about Trade Flash, how it works, and how you can use it on Thinkorswim are:
What Does Trade Flash Cover?
Trade Flash is focused on many events in the market in real-time. They may or may not be linked to the dark pool, but are of significant importance. The type of events that are covered by Trade Flash are:
Events connected to third-party analyst upgrades and downgrades that can be moving the prices of stocks.
Block of trades in either direction that has an impact on market structure, prices, and trends.
Trade imbalances caused due to any such dark pool transactions since they can turn the price trends, change them or even pump and dump the markets considerably.
Events happening on the trading floor in real time that a trader must be aware of.
The larger price movements and unusual trades can go in both ways, and they need to be dealt with with care. If you are a seasoned trader, you can backtest your trading theories with the past data and make financial decisions accordingly.
With each trade flash that you get, you also get a bit of written context. That context sheds some light on the trade data for better clarity. That trade data also comes in handy for you to make an appropriate decision, so long as you are interpreting that data better and quicker than other traders.
Context is of great help since you can have a clear idea based on the shares being traded, volume, time, and keeping an eye on some other metrics in the market.
How Can You Trade with Trade Flash?
Sometimes it is as simple as a quick buy, seeing a large order block or buying momentum in the market, or selling your position if you see someone dumping their shares.
However, it's not always the best decision, since the shares being bought can be dumped on you as well. A bit of market research along with some of the other data makes it easier and safer for you to trade with the Trade Flash and keep your capital secure.
It is always better to preserve the capital instead of going in blind in the markets based on just one indicator. These trades do move the markets, but you also need to be prepared for anything that is coming and safely make your moves while trading.
There are also a few downsides of Trade Flash that must be considered while you are using it to trade in real-time which could be the difference between profit and loss. A few important downsides or lagging factors to be kept in mind are:
- Limitation: The flash trade indicator is limited to the trade data only, and you don’t know a thing about holding time for that particular block. That could be for the next few hours, or at times weeks. The holding time for that block is certainly going to have a domino effect on the market and that is something you must be keeping in mind while trading with such data.
- These financial markets are brutally volatile, so time is of the essence while you are trading with real money in any such market.
- The Disappear: While you can access the past flashes as well at times, most of the events on the trading floor are fast and they require you to take quick action. You don't want to have a late entry into the market, so the past flashes are not of much use except for backtesting the data. That is why you always need to be quick to make a decision based upon these and that will make or break your trade.
Thinkorswim Dark Pool: User Script based on Squeezemetrics Data
Over on the useThinkScript forum back in May 2020 a user took the data from Squeezemetrics and written code so that it looks for long entries when the DIX is over .45 and then to sell it when it is under .39.
Squeezemterics is a service that claims to provide unconventional data that might be useful to traders. You can read more about it here.
This indicator needs to be manually updated every day and it only works on the daily chart as the data it uses from Squeezemetrics is only updated daily. It is a backtesting strategy.
At the time of writing this article on August 22nd 2022 the last entry on the thread was May 6th 2022 so it is not totally dead yet and more updates might happen in the future.
Another important metric to learn about when dealing with Dark Pools is GEX, gamma exposure which you can read about here.
Thinkorswim Dark Pool Verdict:
There are lots of indicators and gadgets on Thinkorswim. They can be effective based on your trading strategies, timeframe, stocks, and the market you are trading in. Trading Dark Pools with the help of Trade Flash can be a good thing for seasoned traders, but it requires certain expertise and you need to backtest the data according to your trading style before you can start using these.
For those of you comfortable with coding then the data on the useThinkScript forum will give you a lot of opportunities.