Trading News: How Market News Can Actually Help You
Markets can move in a blink of an eye when economic data and corporate news surfaces. These often prompt strong short-term moves in the markets, hence creating opportunities for traders waiting for a turn.
What does it mean when you trade the news?
Trading the news is a known technique when trading equities, currencies and any assets that can be traded (a.k.a. financial instruments) on the financial markets.
How significant are news releases to traders?
Trading news is regarded as a significant tool for every trader. Traders are always on the lookout for announcements regarding corporate profits, mergers rumors, management changes and anything which can greatly affect a company’s share price – causing it to either move upward or downward. Even interest rates, unemployment and export rates or policy shifts as decided by the central bank can be a reason for a major change.
When can news affect trading decisions?
Irrespective of your investment horizon, utilizing trade the news strategy is a vital skill to ensure a clever and sound portfolio management.
Apparently, there are two main classifications of news. The first category is said to be Periodic or Recurring, whereas the second one is identified as unexpected or one-time. Periodic or recurring news are news that is being issued at regular intervals. A few examples of such are interest rate announcements from the Federal Reserve and other central banks, as well as economic data and quarterly earnings reports of companies.
For the unexpected or one-time news, such type of news are said to be sudden or abrupt. Some instances might be unforeseen market developments or threats of all sorts that can greatly affect the economy. These are oftentimes undesirable than advantageous.
Where can you get your daily source of market news?
There are news industries that concentrate at a particular segment of the market and there are those that offer a variety of news depending on the highlights of the day. Depending on your preference, you can get your source of market news containing current events and information by print, broadcast, in the Internet and many other sources.
How can you efficiently utilize market news presented?
Concerning market news, traders need to be vigilant and employ proper risk management to make the right move. It is important that you are aware of important events such as FOMC announcements, economic calendar and companies’ earnings reports schedule. You can easily find the information online and plot these events in advance.
Strategizing ahead of time also helps; hence, when the signal you have been waiting for or anticipating gets reported on the news, you can perfectly execute your entry and exit points. Avoid knee-jerk reactions and be rational at all times. Analyze the situation carefully before making your move.
Lastly, do not just be easily swayed by the market sentiment. It is not always healthy to ride with the tide. There have been numerous investors in the past that incurred massive losses since they got swayed. There are also times that you have to know when to ignore the news presented.
Market news plays an important role in the life of an investor. A smart trader is someone that is updated with the happenings in the market and is able to keenly assess the value of the stock along with the market updates. Indeed, it is an effective strategy for traders – both novice and professionals.
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