news event trading

destiny

Member
84 0
im looking for a book, news reactions are different all the time, ive watched news reactions for about 2 years was hoping to find a book about it. can anyone help?
 

Trader333

Moderator
8,599 931
destiny,

In my view the reason you cannot find a book on this is because no-one anywhere is able to predict the outcome of news on markets. All the time you see companies outperform their earnings expectations and by the end of the day the stock has fallen in price. Even bad news often sees the company have a higher price at the end of the day. There appears to be a limited correlation between news and its effect on markets.

For example let's say that some bad news has come out on a company well you will get an initial reaction that will probably see the stock go down in value and then traders can do one of two things. They will either continue with the trading in the same direction or they may now see the price as cheap and start buying pushing the price back up.

Yesterday I saw APPX suddenly drop over 400 points which I presume was some sort of news related event. Within about 5 minutes it had recovered nearly 320 points of this fall.

On other stocks I have seen a sudden fall of 300 points a pause of a few minutes then another fall of 400 points. How do you predict this ?

The problem is that you are trying to predict traders reaction to a news event and that is virtually impossible in my view.


Paul
 

kevinmcm

Active member
220 2
I agree with what Paul is saying. The other one that always seems to me like a black hole is brokers notes. I trade with a group of people and we all have different trading styles. One person who is not doing well is a trader who uses L2/watches every snippet of news/brokers upgrades & downgrades. He had a dire week last wek. Stuffed on BP trades as he was second guessing what the $ would do to oil prices/OPEC saying a possible glut in oil markets/strike in Nigeria off then on etc..

It was a good example of over analysing news flow and getting it completely wrong. The usual outcome was of course that patience would have paid off as he was initially short from around 443 on BP. His positions sizes are big 200pp so I can understand why he gets jittery.

If you were to analyse every bit of news it would surely 1)get inthe way of trading and 2)confuse you as would be second guessing all the time. Some news is ignored and some is taken on board for a short time.

The US towards the end of last year was another good example of news being ignored, even when the figures were duff the view taken was "its not good news but it aint too bad either" and good news was an excuse for another push.

I basically ignore news, I like to be aware of potential problems but nothing apart from good trading strategies will save you from news like "BAY goes bust" sort of headline.

Kevin.
 

Naz

Experienced member
1,391 22
In my opinion i only use news to give me stocks that that will react and give strong moves.I dont care which way traders react to it so long as it moves and the stronger the reaction the better. Because movement gives way to trading opportunities.Then its a case of using your trading skills to extract a profit from the volatility.

I have no opinion on what i think that any news might mean to a stock,i'm not guessing or gambling,i'm trading.

However i wouldn't want to try this on UK stocks,it suits my style in using it for US trading especially the Nasdaq, because i'm right in there where the action is and i can react very,very quickly with minimal spreads and costs.
 
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Salty Gibbon

Experienced member
1,535 6
In my opinion i only use news to give me stocks that that will react and give strong moves.I dont care which way traders react to it so long as it moves and the stronger the reaction the better. Because movement gives way to trading opportunities.Then its a case of using your trading skills to extract a profit from the volatility.

Great quote Naz and so correct and right on the nail as usual.
 

Mr. Charts

Legendary member
7,367 1,184
My own trading and coaching includes pre-market news analysis and then trading with specific patterns according to the market reaction to the news, not the news itself. This is the critical difference that enables you to trade news successfully and profitably.
I'll be explaining and illustrating this in more detail to the many t2w people coming to the seminar in the City next Friday.
 

SUNSEEKER

Established member
872 12
Mr Charts, now that you mentioned the seminar on Friday the 30th January, at least I will give those who are interested in attending a chance to book:

http://www.trade2win.co.uk/events/event.php?id=148

If you have any questions about the content of the seminar please PM me.

:)
 

nobrainer

Active member
112 2
Can't say I agree too much with the posts on here regarding news though I'd agree with Naz's view that you had better go in the direction of the market in the immediate aftermath.
News is by far the most profitable way of trading, albeit the riskiest ,wrt stocks. Stocks which I've benefitted from recently include BGC, AHM, CCH.
When news breaks, don't get caught in the headlights, react quickly to it.If it goes in your favour, average it quickly rather than wallow in admiration of calling it right.If you get it wrong , get out fast , whatever the cost.
It's a risky way to trade but afford big riches .Definitely not for widows and orphans or for those risk averse traders.
 
 
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