Trading Depth #22: Cynthia Cruz, a Dark Pool Queen
Once you master the basics of trading, you start searching for your unique strategy. Cynthia found dark pools to be a gem in terms of predicting the actual market. We are pleased to share her thoughts and experience with you.
Could you please share more on your background?
I am based in the United States, North Carolina. My family has a business in the United States and Mexico, which is why we travel a lot between the countries. Prior to starting equity trading, I used to work in construction.
I started trading just like everyone else. Since I was not very well informed, I was buying stocks, waiting for the prices to increase, and selling them later. Then, I actually met Bret Bossenberry and he became my mentor.
How successful were you with your initial strategy of buying stocks and betting on their prices to go up?
I was able to become profitable to a limited degree. Bret told me about options. I was learning from him and started trading on my own in a couple of weeks. He was telling me to slow down, limiting the risk exposure. Bret eventually introduced me to Bookmap and, after looking at it, I decided that I needed to get it for myself. Initially, I was using it for equities. Later, I started implementing dark pools strategies, which I use simultaneously with stock trading today.
How long have you been using Bookmap?
I have been using Bookmap for approximately a year and a half. Originally, when I started using it, dark pools were not a part of the platform. I am glad that they are being implemented now. It is a lot easier to see them on the same screen, instead of having a browser open on a separate monitor.
How did you become aware of dark pools and start using them?
One of my acquaintances mentioned dark pools. He had another trader come into our small room of seven people and explain it to us. It was very exciting for me. The dark pools provide you with a print every day. It is like a countdown with the print, so you can tell what they want to do. You can get a print that Stefanie Kammerman called a “Levis” of 500 series or 501, 502, 503, or 504 series.
Along with that series, you also get a price at which they bought or sold, so it is possible to use that information as a guide. I have been keeping track of the price movements for the past two weeks. I have a calendar on my wall and I write down the number of prints that have come out. Then, we use the moving average as an aid.
The prices on dark pools reference the market, but it is not the actual price. For instance, right now, we got a print at 12-13, and the price was 298.50, while the market was 298.53-54. This would be considered an actual real-time print. However, our 503 series was at 297.90, as the market was 290.52, which would mean bullish. It is a way to see signals from big players in terms of what is going to happen on the public market.
How much time has it been since your first time using dark pools? How has it been for you?
I have been doing dark pools for a year now. I have spent a lot of time learning. I became involved and understood it partially, as I saw that there were actual signals within the numbers. I dove into it and did backtesting.
How do you combine Bookmap with dark pools? What are you reading that gives you an added benefit?
I am looking at the liquidity heat map and its colours, commonly paying attention to the bright ones [areas of very high liquidity], combined with the dark pool transactions. Most of the times, I work with the 15 and 30-minute intervals, also zooming in and out. In addition, I also use the Bookmap quotes counter column.
Tell us about your daily routine. How much time do you spend trading?
I trade daily. In terms of schedule, it varies. Lately, I start in the morning and spend an entire day. There are days where I would not start trading until 12 o’clock. I pay attention to Saturdays, as I am trying to get into the futures. I’m currently playing around with different configurations.
Without getting too deep into your strategy, tell us which signals are you looking for and what are they telling you?
Currently, we can tell when certain signals are coming. In case it gets choppy, I look at another ticker, not paying attention to the initial one until the evening. I come back to SPY for the cues, see if we get any prints, and go from there. I also buy overnight. In case I think that it is going to go longer, I will buy two-weeks-out options. I am also trying to get into the habit of buying options for months. It is much better than buying something the same week. I have notebooks full of detailed notes.
It makes good sense to marry the dark pool signals with the options in the long term. What is the win ratio for these options? How many times do you succeed, let’s say out of ten when you are watching the dark pools? Is it better than trading stocks without looking at the dark pool?
The ratio is about eight out of ten. It is not always 100%, especially when the news comes unexpectedly, because the process is news-driven. I do not obsess over the losses since the prices commonly go back to their previous levels. That was the reason why I went over two weeks for options. The volatility was too high for shorter periods. The losses were also higher.
Would the implied volatility go along with the signal that you were receiving? In case of the lighter news or a data release, would you consider scaling into it, or holding a position?
Correct, but most of the time it goes the opposite way, primarily because of the news. In the dark pools, people might give out a signal, while they were caught off guard themselves. I would usually hold the position because after everything dies down, it goes back to normal. The size of the transaction in the dark pool would also determine the period for holding the position. For instance, this morning, we got a 1 million print which meant that it was necessary to get in and get out quickly.
There are many high-frequency traders out there. Are you familiar with the technique?
I am slightly familiar with the technique. I follow a trader on Twitter, Steven Hammer (@HFTALERT). He is a very talented high-frequency trader that works with Algos and the Dark Pool. However, I focus on my dark pools along with Bookmap. I know many people that join different rooms as they are trying to learn, but their mentality is to get rich quick, which becomes their downfall. They seek spots where they think they can make money while switching frequently. This is how they blow their accounts and go back to basics. I stick with Bookmap and dark pools, which works for me quite well.
The mentality of some people is “get rich quick,” which becomes their downfall.
What type of risk strategy are you using? Do you have your stop limits or a specific daily trading plan?
It depends on the amounts of contracts I bought. Generally, I am willing to lose $200, at most $500. Reaching the limit means that it is time to get out. However, as soon as it goes green, I will scale. In case I have 50 shares, I would sell 30 or 20. I may also sell 10 and wait a bit more. Sometimes, I do the opposite and sell most of them to keep just a couple of shares.
A question for those just starting out: when they see a dark pool transaction happen outside the best bid and offer, what does it signify to you or the market?
It depends on the circumstances. In case it is outside of the bid and the offer, we call them the “fat fingers.” The interpretation of the signals depends on the activity and the specific history with the trade. We also use option models. The risk of loss is always there and it is important to determine a limit for each individual person.
In terms of unstudied data and reactionary trading: once you notice a price structure that already traded for the day, but then you see a dark pool near the highs of the range, the prices would be in the middle of the range. Would you be viewing that as a deal that is making up something from the past, or would it be a signal that the price is about to go?
You may have late prints from yesterday, or from two days ago. At the same time, there are prints that are from live trades. It is important to have the ability to tell the difference for using the dark pools successfully. It is also possible to get an old print with a new print, which is when the details are particularly vital. In addition, most people quit at 4 pm. I stay until 4:15 or 4:30. Bookmap also usually lights up at 4:15 and 4:30, which reflects what the others are doing and what they are planning to do the next day. This is why I might buy my options in that 4:10 – 4:14 window, as the dark pool prints also start arriving.
Could you tell us about your setup? Do you have several screens, as most traders do?
We have my own laptop, connected to the TV. My daughter Daisy has her own PC with a separate screen. We also have a PC in the middle in case we need to search for something. Thus, we have five screens in total. Our chatroom is also very efficient, as we are very friendly and helpful. We share information and data. I have done webinars, where I would demo Bookmap. I do them at least once a month.
After you finish your trading day, do you practice debriefing your trading session? Do you take notes and analyze potential mistakes?
We take notes all the time. Every couple of weeks, we review the notes. I have also charted out the dark pools. We record everything and put it on the walls. It is easier to find it this way. We also have an equity clock, telling us when the banks and the other sectors start moving.
Would you say that most of the trades are occurring in the dark pools and people not participating are missing out?
There are services attempting to interpret dark pools, but they are commonly making mistakes because of their lack of understanding.
Have you read any popular books?
I have read Stephanie Kammerman’s The Stock Whisperer several times because she discusses concepts based on her knowledge. The habit of making purchases after hours was one of the things I discovered through the book. The Reminiscences of a Stock Operator is also a good book. The Series 7 Exam is a useful book for beginners containing a lot of helpful information. Also, Day Trading by Justin Kuepper and How to Make Money in Stocks by Matthew Galgani is on my list too.
Have you ever panicked during the trading session?
My husband panicked once when I was down $20,000 during the news about tariffs. I was sure that it was news-driven. Eventually, I closed the day with the $4,000 profit. The philosophy is never to panic and always be ready to lose the invested funds.
Do you have any tips for the traders starting to use dark pools? How long did it take you to gain confidence and knowledge that you were on the right track hitting 80% of the trades, eventually becoming an expert?
Dark pools may generate misinformation, which is why education is critical. It is also important to avoid getting overconfident. Setting an account limit and trading solely with previously earned profits is a good approach in the beginning. Analyzing historical data is very important. Backtracking allowed me to succeed with the dark pools. It took me around six months to learn.
Any advice to beginners interested in this topic in terms of where they could start?
First, education is essential. It is possible to message me or come into our room (we are charging a fee). I could also recommend someone to help with particular aspects, like Fibonacci charts. Discipline is also critical. Second, limit your trades. It is essential to select several trades and learn them. Third, set a goal in terms of a daily or a weekly profit. Trading with earned profit also limits the degree of emotional stress.
Do you have the final amount in mind that you would reach and stop trading?
No, I love trading. I quit my job in construction and my son took over. I help him sometimes, but I definitely prefer trading.
Thank you for your time.
Where to follow Cynthia:
- Education is a vital prerequisite for trading
- Bookmap and dark pools provide a valuable combination contributing to the higher success rates
- Trading with previously earned profits limits the degree of the potential emotional distress
- Discipline enables growth over time
- Teamwork is valuable for traders