Darkpool Q&A

How did you get started with darkpools?

I’ve always been interested in “big money” or institutional investing that moves the market.

Has anyone inspired you? Who have you learned the most from?

Stefanie Kammerman has a great book on Darkpools. I tried parts of her service out, but I just didn’t click with her methodology. Don’t get me wrong, her foundation is spot on and her book wonderful. I highly recommend reading it. Someday, I’d like to write a book to talk about my methodology.

Bill Albert is another person who constantly talked about institutional money. He called them “the boys at mission control.” I’m keeping that term alive now that Bill doesn’t have a service anymore.

What led you to write your own darkpool system?

A few years ago, I tried out a service that advertised darkpool data that shall remain nameless. I had a nice trade cooking on KR with their data and was up about 8%. Then KR crashed, lost all the gains, and then went down 10% more. I found out later that the service left out $2 billion of trades at the highs. Those were sells obviously.

I was talking with one of my friends about a service to mine tick data for darkpools, and decided to write my own system. We were in lockdown and didn’t have much to do anyway. I’m a trained developer from the IT dark ages who learned to code in the 1980’s on Apple II’s, TRS-80’s, and TI 99/4A. I taught myself JavaScript and built a simple SQL database on Google’s platform. Google has a script engine that is easy to use and has a powerful API library to integrate with Google Docs.

Why don’t you sell your system as a service?

That would be nice, but the cost to make the data available is prohibitive. I’d need about 100 subscribers just to break even. Others have written good systems already. I’m much better at interpreting the data than writing modern code anyway.

Why did you start a Substack?

My Twitter following kept asking for more. I thought that Substack the best way to talk about institutional positioning without direct access to the data feed.

Why don’t you write the Substack for free?

I write an intro and give SPY data out for free. My view is that you give to the world and the world gives back to you. Someone gives to me and I give back to them. It’s a very simple law that is enforced in the world where we live. In addition to the Substack, I post juicy data to Twitter from time to time, actionable data that would be expensive in a service.

I have several hundred hours invested in coding that darkpool system. Data feeds, script engines, and databases cost money every month. I also spend around 30 minutes each trading day writing the Substack, sometimes more. The subscription is $12 a month right now, which is very economical. I used this same data on a trade this month that would pay for the service for maybe 100 years.

My suggestion is to do the 7 day free trial and see if it helps. Then try out a month and watch what happens. You’ll know in month if you want to stay.

What extra data points do paid subscribers get?

My template is the same each day.

Intro and SPY prints are free.

Macro trend: This is how the trades > $40M are behaving. I also include bullish and bearish trade count.

QQQ prints Duh…

Large prints These are typically the trades > $75M

Unusual prints Trades over the 30 day moving average that are at least $25M

Close prints These are the trades that come in at closing price. The real darkpool trades where we don’t know the trading price. Most services ignore these trades, but I think they are very important to use for levels.

Summary Wrapup of my thoughts on whether the institutions are bullish, bearish, neutral, or some place in between.

What services do you recommend?

My email trailer has 2 services where I am a member.

Volumeleaders.com The person who runs this service is one of my friends and his service provides near real-time block trade data with analytics. The service is economical and uses the same data feed as my system.

Flowtrade.com This service has block trade data, algo flow, and a fantastic trading community.

Why is my data different than other services?

Since my system is only for me, I can make changes quickly, whenever I want to. Another thing I do is aggregate trade data (sometimes called iceberg trades), so trades 10 cents apart on a $300 stock will go to the same line.

Often I see Twitter posts about darkpool flow or darkpool indexes. My analysis is often opposite of those automated systems. I’m very skeptical of secret indicators, unless I see them proven day in and day out.

Do you know the direction of a darkpool trade?

Simple answer is no. If anyone tells you they know for sure, they are not telling the truth. You have to look for clues. You have to look at the context of the trade. You have to know what happened last time they did a similar trade.

For example, $60B of SPY trades in a crest is going to be 99% chance of selling and a market dump soon. Another, if the market has been dying for 2 weeks, a $10B SPY trade at the lows is likely the big institutions covering shorts and you get a little rally the next few days that fails. They can short and cover for a long time.

Why don’t you post trades?

I never plan on doing that. Too much responsibility. My goal is to give you ammunition, you decide when and where to shoot. You decide risk tolerance and timeframe.

I will let you know if I have a position in any fund that I discuss in the newsletter.

Sometimes on Twitter I may even let you know when I exit.

Do the darkpools buy the bottom and sell the top?

They don’t, and that is a common misconception. The darkpools constantly buy and sell. In a trough, they typically don’t buy the bottom. They buy into strength and sell when everybody and their brother turns super bullish. A couple of my Twitter followers told me I was an idiot when I posted that the darkpools were selling CCL into a bullish run. They sold $1 billion for 3 days in a row before price started dropping like a rock.

Can you analyze more than just the megacaps?

I would like to but don’t really have the time right now.

Leave a comment if you have a question that wasn’t covered here.