Stock news trading strategies

Most used dirty practices to stop traders from trading the news include:. In order to be successful while trading on news, a high-quality broker must offer instant execution , because news trades happen fast, so your execution needs to be done at a very high speed. The psychological aspect of news trading is extremely important as the traders must process all variables, interpret the released figures and put their plan into action, instantly.

Traders must understand the data, must be capable of making those decisions and manage their emotions. In a summary, their responsiveness must be on point. An economic calendar is a very important tool for any news trader, as its strategy is based on smaller a time frame. I prefer to use the economic calendar on the Forex Factory website. Here is what you should do:. Economic indicators play an important role in the financial markets.

When you are trading the news, you must evaluate the potential effect an economic indicator can have on a particular market. Other economic indicators are able to move the markets quite seriously. Before any news announcement, even though you are planning to exit the market quickly, you must analyze the chart. You want to know in advance where the bulls and bears might enter the market and potential price levels to avoid during news announcements, like a professional news trader.

Also, you should already know where to set your stop-loss orders and take-profit levels. A straddle trade involves taking both sides of the price action, on a short term. Note: ALWAYS use stop-loss orders and take profit levels when trading the news , as the market can get extremely volatile. An OCO one-cancels-other order is a pair of orders that are linked together. When market movements cause either order to be filled, the unfilled order is automatically cancelled.

This order management ensures only one of the orders is executed. Buy the rumor, sell the news is a market belief that prices move in anticipation of rumors and profit taking occurs after the actual news is released. More exactly, prices tend to increase as a rumor occurs on the market and decrease when the rumored event is released.

The market traded lower and lower during the day, and when the actual news was released, the price went in the other direction — upward- despite the bad news released for the Euro currency. This types of movements happen often. Evaluating forecasts and being mentally prepared to execute the trade at the moment of impact of the news is a very difficult and risky task, as there is no guarantee that this strategy will work every time.

By combining news trading with a proper technical analysis system, a trader diversifies his entry methods and will gain an extra edge to be profitable in the long run. In the example above, we determined that the main trend was downward, as the price was traded below the EMA50, confirmed by the OBV indicator. We placed a sell stop order only, one minute before the release, 10 pips below the current market price.

This is a conservative strategy and will help you take the trades only in the direction of the prevailing trend. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. The indicators, strategies, articles and all other features are for educational purposes only and should not be construed as investment advice.

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Share on facebook. Share on twitter. Share on linkedin. Share on whatsapp. Share on reddit. Table of Contents. Of course, that is easier said than done. Many factors influence the decisions made by traders and investors on where a market could move to next. It's just one reason why risk management and the use of stop losses are essential in managing a trading account or investment portfolio. So how do traders and investors determine the future price direction of a market? Most retail traders will look towards technical analysis to identify patterns of buying and selling from the bigger players in the market like investment banks and hedge funds.

But how do they determine the future price direction of a market?

Usually, they have teams of researchers analysing the news for their trading desks to then trade the news and to start building positions. Fortunately, access to news is much easier than it has been in the past. As good or bad news influences the decisions made at a bigger level, knowing how to perform news based trading and having the right news based trading strategies is key to having an edge in the market. Before we look at different strategies on trading the news on different asset classes, let's first look at the different types of market news there is.

Did you know that Admiral Markets provides access to Spotlight Webinars which are free, live trading sessions, produced three times a week, by professional traders who will show you a wide variety of technical and fundamental analysis news based trading techniques, so you can identify common chart patterns and trading opportunities in a variety of different markets? Understanding the different types of market news that influence trading and investing decisions is essential in building a news-based trading strategy or methodology.

Bearish: EUR/GBP

Generally speaking, market news falls into two categories: scheduled and unscheduled. Let's take a look at both! Scheduled news are announcements that traders and investors know about beforehand. While they don't know what will be said or released in the scheduled news announcement, they know when a news announcement is to be expected.

Below are a few examples of scheduled news that traders and investors will analyse for clues on future price direction. These are economic news announcements that are released at the same time every month and include news items like interest rate announcements, retail sales, inflation reports, employment reports and others. The release of these numbers are widely watched by traders and investors and has the potential to move most asset classes.

You can view when these news announcements will be released in the Admiral Markets Forex Calendar page. A screenshot of the Admiral Markets Forex Calendar which can be filtered impact, country, timezone and language. Publicly traded companies tend to release trading updates to investors every quarter. This period of time is known as earnings season and is known to be a very volatile period for stocks. Typically, a company will release its latest earnings per share, income and sales numbers, while also providing guidance of what to expect for the next quarter.

There is also an earnings call where questions from investment bank analysts, the media and investors are asked and answered by management. During earnings seasons there is a lot of information to digest which will influence traders and investors' decision on whether to stick with their shares, dump them or add some more to their portfolio.

When trading the news of company earnings, some may choose to wait till after company earnings before establishing a position. This is due to the fact the stock could gap up or down depending on whether the earnings report is good or bad, as sometimes the report can be released before the market opens or after it has closed. Earnings season tends to fall in January, April, July and October. Not every publicly traded company will release an earnings report during this time but the majority will. The actual announcements can go on for a few weeks as there are many companies to analyse when looking at US and European shares.

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This allows traders to view market news, instrument news, a global sentiment indicator, and a corporate calendar detailing earnings and dividend announcements, as shown below bottom left :. You can gain access to this feature and many others by opening a trading account with Admiral Markets today! Simply click the banner below to start your live account application process:. While the date of an election is known beforehand, the outcome is not. Nonetheless, election results play a huge role in the decision-making process of traders and investors determining the future price direction of a market.

For example, a business-friendly government would likely attract international investors as any policies implemented in their term would likely benefit companies. When US President Donald Trump won the election, the US stock market started a multi-year bull market rally, until the coronavirus pandemic in Please note: Past performance is not a reliable indicator of future results.

His policies were market and business-friendly with a cut in corporation tax and looser regulations.

Even though the outcome of an election is unpredictable many investment banks and hedge funds hire companies to poll people when voting to try and get an edge in the market. On some occasions, it can be clear well ahead of time who is likely to win. Many traders and investors would then try to position themselves early for a good, or market-friendly, result.

Of course, there is always the risk of 'surprise' which could send the market the other way. Risk management, as already mentioned, should be a hallmark of any news-based trading strategies. Quite often there are unexpected news announcements or events that catch market participants off guard. These types of news events can cause significant swings and trend reversals as everyone readjusts their portfolios or exits the market accordingly.