The institutional buying and selling chart called the TICK lets us intelligently speculate on what institutional traders are doing. Institutional trading is highly secure and is a very guarded secret among institutional trading firms. The best amateur traders can do is to speculate on what institutional traders might be doing.
Trading volume normally will spike if large institutions place a big order. Along with the stock price’s change, you can make some guesses. For instance, if trading volume spikes relative to the stock’s average volume at the moment when the stock price also goes up, that may mean large investors are buying. Alternatively, if you notice a stock’s volume increase and the stock price drops, you might guess institutions are selling.
The drawback of this method is that volume can be impacted by external variables, like options expiration, short selling and window dressing.
Another method for tracking institutional trader activity in individual stocks is using the Edgar system to track form 13F filings with the SEC. The institutional trades are not posted on the Edgar website until about 6 months after the trade. Investopedia did an excellent article on tracking institutional trader activity through 13F filings here.
Obviously what makes using 13F forms practically useless for amateur traders is how long the information is delayed by the SEC before being released to the public.
There is a more timely way to track institutions than investigating volume or old 13F filings with the SEC to determine when there is institutional buying (or selling) and it is referred to as the $TICK chart.
Institutional Buying and Selling Chart
I came up with this method many years ago when charting software vendors added the $TICK charting tool.
First, let’s be real. There are no retail or professional traders anywhere that can see what institutional traders are buying or selling. The best we can do is to guess. Another method I use to track institutional trades is by following orders that come off dark pools. I did a trading lesson on dark pools here.
Using a TICK chart as an institutional buying and selling chart, the idea is to track how well market makers can match up a buy order with a sell order by the end of trading on a specific day.
When institutional buying and selling occurs, it’s usually broad-based and happens across several sectors at once. This massive buying (or selling) by institutions make it harder for market makers to match up a buy order with a sell order by the end of day close and so the TICK chart closes with a large imbalance. The TICK institutional buying and selling chart detects possible institutional trader activity with anything over +9000 or below -9000. Anything between +9000 and -9000 is considered normal retail trading.
Remember, institutional buying and selling is a highly secure and guarded secret among institutional trading firms. If retail traders like you and I really knew what institutional traders were buying and selling, we could front-run their orders and make millions of dollars in a short period of time. If we actually knew what institutional traders were accumulating, it would totally disrupt the predator versus prey ecosystem. I did a stock trading lesson on institutional trading predators here. The best we can hope to do is to speculate on what institutional traders might be doing. We did another lesson on institutional buying and selling here.
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