What should you know about dark market trading?

The Benefits of Trading Stock CFDs over Traditional Stock Trading

Stock trading, what is it?

You would have come across words like stock exchange, stock market trading, shares, etc. Stock market trading is the process of buying and selling of a company’s share by the investors via any brokerage firms or electronic trading systems. If a company is public, it will issue shares to everyone in the stock market. When you buy a stock from them, you are buying a part of the company. Based on the popularity of the company or loss of hope on that, people will buy and sell that company’s stocks. This process of buying and selling the stocks will reflect in the price of the stocks. If more people suddenly start to buy a company’s stock because of the announcement of a big project by the authorities, the stock price will start to rise. But if the stock price continues to rise for a long time, you should be aware that it will fall at any time. Likewise, if there is a conspiracy about the downfall of a company or rumors about the failure of projects, the stockholders will start to sell their shares in fear. It will create a drop in the price of shares. There will stock exchanges where traders and brokers will involve in trading. Apart from trading exchanges, there will be some private forums run by some large firms known as the dark disk that also allow people to trade. In this article, let us discuss the dark market trading in brief. 

Dark Market Trading 

Dark market trading is the transaction process with new stocks that are not matched with the national stock exchange trading system. These forums will be under the control of large brokerage firms in the industry. They will allow some private people to trade large quantities of stocks without revealing their identity publicly. This trading activity will include only new shares. It will only reflect the performance of new shares and do not consider the needs of the entire stock market. 

Advantages of dark market trading

  • If the investors did not win the lottery on bidding against the new shares, they could buy them using dark market trading.
  • There will be no exchange fees, hence lower transaction costs.
  • The market impact will be less for larger orders.
  • They can have a profit in advance if the new shares perform well in the dark market trading and wait for the listings.
  • The Dark market will reflect the performance of new stocks that are going to happen after the listing.

Limitations of dark market trading

Although dark trading will reflect the performance of new shares to some extent, you cannot solely rely on this data. The Dark market listings can have an impact on the first day of listings. But you cannot assure it will be the same reflection forever. The stock market is subject to demand and market conditions. So, you should not use the dark market trading performance of new shares as the primary indication of happenings after listing.