Q&A  |  DEC 2005

Q&A by Don Bright

Stocks & Commodities V. 23:12 (34): Q&A by Don Bright SINCE YOU ASKED Confused about some aspect of trading? Professional trader Don Bright of Bright Trading (www.stocktrading.com), an equity trading corporation, answers a few of your questions. To submit a question, post your question to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C. TAPE READING Q: Here’s a scenario for you: ABC stock is presented at 100.00 (56k) X 100.05 (100) All other factors being equal, for the sake of discussion, do you: (A) go long at the bid? (B) go long at the offer? (C) short at offer? or (D) place short at bid? Thanks for your input.—shortseller A: Since this is just one part of many overall tape-reading data, there is not nearly enough information to make a decision. For example, what is the depth of the NYOB? What is the PREM or DISC to FV? Tape reading is all-encompassing —it’s more than just looking at a simple level 1 quote as it comes up on the ticker. That said, we never teach our traders to get in front of a large order, because price moves to size (and through, quite often). Instead, we teach that more often than not, the “not so well trained” guys place orders a penny or two in front of big orders, thinking that they have a great stop-loss just a penny away. And as we all know, that’s rubbish… when the offer goes, it goes all the way, and these guys scramble to cover shorts and so on, running the stock up through that big order price.

by Don Bright