Block Trade - Definition

Block Trade Definition

A block trade is a transaction that is a minimum of 10,000 shares of stock or $200,000 of bonds.  Large block trades are handled by investment firms.  If a company or person were to go out and attempt to buy 2,000,000 shares of a stock that only trades 500,000 shares on a daily basis, would cause a price spike in the stock.  This is because there is not enough demand to meet such a large buy order.  So, companies or wealthy investors will work with investment banks to find a buyer or seller of the block so that it does not upset the balance of supply and demand.  Large block trades provide an indication of the true value of the stock because it shows you where institutional investors are pricing the stock.

Filtering for Block Trades

Most direct access brokers provide a time and sales window.  Traders can use the filter option within the time and sales window to only display trades where the blocks are greater than a certain share amount.  This will allow you the trader to filter out all the small orders and only focus on large block trades.  This is critical at key support and resistance levels as it provides you real-time access to the trading activities of the smart money.


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