Market Research for Traders by Iroabuchi Onwuka

By Iroabuchi Onwuka

Market has become rocket science. It is now very difficult to conduct any perform questionaire based on what is going in the market today. The real test of any research is the usefulness of the discovery, and many of these researchhead need their 'reserche material' composed mainly of statistics. In fact most successful Market engines and Engineers, have little patients for the outside world and the world of opinion outside facts and figures. You can't talk to these people without direct quote and references. These research groups are either working for their group or are working for themselves. If for instance, Toyota is a good company, it's simply because of serious market research and questionaire that make up much of their service reps. GM conduct their own research but it is not as strong as a Toyota and GM follow very little of what the customers are saying. In day trading, this is also the case, and given the temperature of online trading, it is seriously useful to stay tuned to your very personal observation and researches. This is the theme of many market analyst and I seriously encourage many companies in US to do the same and not just that many in US and Europe, but companies around the world and Nigerian.



My inspiration to write this essay, begins with what I read recently in a book by David S. Nassar, titled 'Rules of the Trade', published in 2001 by McGraw Hill Companies, Inc. The book is truly full of "indispensable insights for online Profit" with a commanding foreword by William Lupien. What seem very significant to me is the mention of Research and use of Research in day trading. Mr Nasser who has been a very long Trader shared his personal views on the merits of self conduct and personal research. He made references to his personal life and years as a day trader, adding the necessity to "create a writter plan" and to stick with it. Here I intended to quote much of his writing of research and from the book.



P.76

"it is imperative to trade strong stocks that are well suited to your training style. Quality research is the key that opens the door to ensuring that you are always trading stocks that yield the greatest chance for success....using a sound methodolgy is crucial. One approach I suggest is the top - down approach"



Traders like Nasser explain 'top down approach' as the process that involves "taking a macroview of the market and identifying those stocks within major industry group that show signs of strenght and activity." The 'novice' trader like the best of us can use this process to help himself or herself in the market.



Nasser continued that "the top down approach essentially starts at a baseline of the available stocks and uses individually tailored creteria to figure out the vast majority of these securities from consideration." For instance, the Dow, the S & P 100, the S & P 500, or the Nasdaq 100 and so on can used to improve your management portfolio and trade option. David Nasser continued in p.78 that "as a beginning place for searching for tradable stocks. The S & P 500 is often selected because (a) it includes both listed and over the counter stocks and (b) the vast number of securities within the index virtually guarantees that all industry sectors make up our greater economy will be well represented. Despite the continued dominance of the S&P as a starting ground for selecting stocks, the NASDAQ 100 has seen significant growth in terms of its importance to traders."

According to Nasser, the NASDAQ 100 has seen significant in start up companies, that it is "now a great place to start finding technology-related stocks that can quickly gather the momentum appealing to short-term traders. As for the Dow, it is unlikely it will provide a significant list of stocks for you to trade; nevertheless, due to its continued importance as the bellwether index and its inclusion of the strongest of the large cap companies, it should still be watched closely as an indicator of overall market health".

"Once you have chosen a major index as a starting ground, analyse which sectors within that index also appeal to your interests (e.g., financials, technology, biotechs, or semiconductor). The Standard & Poor's Web site not only lists each of the stocks within the S&P 500 but also gives a description of each company and the sector and subsector classifications of each
(http://www.spglobal.com/ssindexmain500text.html)."

"Many of you might ask why you need to find sectors that are of particular interest to you, rather than just picking the sector du jour. The reason is passion. If you don't have passion for the industry sector in which the stocks you are about to research reside, then you won't have the desire to actually do the research to the best of your abilities even when you are tired from a full day's work".


"Once you have selected the sectors that appeal to you, re-examine the lists of stocks within that sector. Are these enough stocks within that sector to continue refining your research, orshould you use the sector description to expand the list of stocks within that sector, even if the additional stocks are not within your major index? It is likely that you will have to conduct additional sector research to ffind a full list of stocks within that sector, which you can the continue to narrow down. Several good Web sites provide excellent research about particular groups of stocks that can be used to create a robust list of stocks within each sector, including the following."

Nasser continued with the following example

"http://www.amex.com/ The American Stock Exchange Web Site provide lists of stocks within each of the Select sector S&P Depository Receipts (Select Sector SPDRs) as well as information about the stocks within the various Merrill Lynch & Company Depository Receipts (HOLDRS). These are great sector groupings in which to find stocks within a particular sector.
See http://www.amex.com/structuredeq/holdrs_tth.stm for an example of a listing of securities within an HOLDRS sector."

"www.phlx.com/index.stm The Philadelphia Stock Exchange Website lists the stocks within several sectors, including the closely watched semiconductor sector, thestreet.com Internet sector, and the wireless telecom sector. The S&P Global Website provides a lsiting of the stocks in the S&P index and their sectors. if you have chosen a large sector such as technology, you may need to further narrow your choices to telecom, chiapmakers, box makers, or some other subsector of technology."