What is Dark Pool Rating?

A short-term signal that ranks a stock by the appearance of activity in dark pools. Dark pools are exchanges that only institutions trade on, where securities trade at different prices than the rest of the market, and where institutions can delay reporting for up to 24 hours. This allows institutions to make trades without immediately affecting the “market” price that you see. Almost always these transactions take place above or below the live price you have access to. 

How to use Dark Pool Rating?

Dark Pool Ratings range from 0 to 100 and can be examined for a certain stock or an aggregation of stocks such as ETFs.

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A high Dark Pool Rating  (80+) means the stock is being traded often in dark pools. This means that institutions are interested in masking what may be the natural moves of the stock in the open market. 

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A low Dark Pool Rating (20 or less) means the stock is being traded less often in dark pools. Stocks with low Dark Pool Ratings are typically ones where you can be much more confident the stock price you see reflects the real “market value” of the stock.

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Stocks with a high Dark Pool Rating are likely to experience sharper short-term price fluctuations than stocks with a lower Dark Pool Rating. Be cautious with high Dark Pool Rating stocks, as institutions might intervene to suppress price momentum, leading to unexpected price behavior despite positive sentiment and price momentum.

Update Frequency and Usage for Dark Pool Rating

Dark Pool Rating updates once per day. As dark pools are allowed delayed reporting of up to 24 hours, it is often a full day before dark pool trades impact the markets. 

As with all of Prospero’s signals, Dark Pool Rating is best used alongside other signals. A high Dark Pool Rating for a stock should make you think twice about entering a trade even if the stock has positive performance in the other short-term signals because institutions could be deceiving you.

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