Trade idea

Trade ideas (or trading ideas) are investment ideas ("long" i.e. buy, or "short" i.e. sell) which are sent by institutional stockbrokers to their clients. They typically propose a trade in a specific stock and are developed by the individual idea author’s (e.g. a salesman) own knowledge of their client’s particular area of investment interest, so will take into account: the client’s investment style, portfolio size and the sector and geographic focus. Recipients of trade ideas can be hedge funds, bank’s proprietary trading desks and money managers. Trade ideas are sent to the client with a recommendation to buy or sell, an investment value (e.g. $2 million) and often a timeframe and an indication of level of conviction.

Brokers only send trade ideas to their most valuable clients. In return for receiving ideas that provide superior investment returns they are rewarded with increased commission payments from their clients. Trade Ideas are therefore highly performance related. Only brokers providing consistently good ideas are rewarded by the client and only those clients prepared to pay for them will continue to receive the brokers’ ideas.^[1]

See also

• Alpha capture system

References