ANALYST REPORTS

I am part of a small group of traders and investors, most of us pretty new to the business. We spend a lot of time doing research, checking charts, fundamentals, technicals, and all the rest. A newcomer to our group is telling us we should really just focus on analyst reports, because it’s easier to rely on these “experts.” What do you and your team of traders rely on? —Jeric

Let’s go through the list, and then I’ll answer your question regarding analysts directly.

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ARE CHANGES DOING US GOOD?

Mr. Bright, first of all, I want to thank you for your assistance in the past. You have been kind enough to send back email responses personally, and I read your column in Stocks & Commodities every month.

There have been so many changes in the markets over the last few years, some good, some not so. I am looking forward to a new year of trading and was hoping you could help me with a few issues. Perhaps either give me some solace, or send me in another direction. Thank you in advance:

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HIGH-FREQUENCY TRADES

Recently, the Stocks & Commodities “Opening Position” referred to the domination of the markets by high-frequency trades (HFTs) (S&C, July 2012). I have heard that many times and many places, but I have never heard any actual statistics on the subject. I realize it is in the HFTs’ interest to remain out of sight, hidden in dark pools and other not easily defined spooky places. Any examples of HFT trading seem to suggest they trade large volumes of equities, futures, options, and the like for small amounts of price movement — maybe two-tenths of a cent. Liquidity is always necessary, as is exchange help for volume. Large volume with large bid/ask ranges are obvious price movers. How do large volumes of small spreads have much effect on pricing? I’ve never been able to understand that. Thank you. —Robert B. Millar

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NEW TRADER, NEW QUESTIONS

From Claude Moran: Mr. Bright, I’m in my late 20s and have just started a career in professional trading. I have my license, have put up my own capital, and get to keep most of my trading profits. I have read your column in Stocks & Commodities for a long time, and I do my best to digest your responses when they apply to my situation. Like your firm, I stick with equities and trade stocks and exchange traded funds (ETFs) exclusively. I hope you won’t mind answering some basic questions. Here we go:

1. I have a mentor who likes to trade from the news on individual stocks. He pays for several services that give him news before anyone else gets it. I am skeptical if this is really true. And do you have experience with this type of trading?

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