What Is Dark Pool Rating
Dark Pools are exchanges that only institutions trade on, which help them make trades without immediately moving the markets. Trades made in the Dark Pool could be for different prices than the rest of the market and institutions can delay the reporting of the trade for up to 24 hours. Higher Dark Pool Rating means that institutions are interested in masking what may be the natural moves of the stock in the open market. A low rating means you can be much more confident the stock price you see is one that reflects the real market value of the stock.
Stocks which trade heavily in the Dark Pool and have a high rating (80+) are likely to be in for sharper moves in either direction in the short term. It is important to keep in mind that a stock with a high Dark Pool Rating could be confusing to watch. You could see stocks with a lot of positive social sentiment and price momentum not moving up as much as you'd expect, because there is institutional interest in stopping the momentum.
Or the reverse. If a stock has a lower Dark Pool rating, (<20) you have higher confidence that what you are seeing in the price movement reflects the actual supply and demand in the market as a whole, as opposed to what may be the will of a few large market makers looking to move the price in a certain direction. Sometimes for the sole purpose of the psychological impact on retail traders.
How to use Dark Pool Rating?
Stocks which trade heavily in the Dark Pool and have a high rating (80+) are likely to be in for sharper moves in either direction in the short term. It is important to keep in mind that a stock with a high Dark Pool Rating could be confusing to watch. You could see stocks with a lot of positive social sentiment and price momentum not moving up as much as you'd expect, because there is institutional interest in stopping the momentum.
Or the reverse. If a stock has a lower Dark Pool rating, (<20) you have higher confidence that what you are seeing in the price movement reflects the actual supply and demand in the market as a whole, as opposed to what may be the will of a few large market makers looking to move the price in a certain direction. Sometimes for the sole purpose of the psychological impact on retail traders.
Update Frequency and Usage for Dark Pool Rating
Dark Pool Rating updates once per day. As the Dark Pools allow delayed reporting of up to 24 hours it is often a full day before the impact of these trades impact the markets. Dark Pool is best used alongside other signals, high Dark Pool Rating may have you think twice about entering a trade based on short term signals and even a number from the previous day is useful in signaling this kind of caution.