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Using News Sources In The Stock Market
By Jobo Smith
It used to be that you could make a decent living using news to intraday trade, providing you were astute and faster than others at getting your order in. These days the power of computers has really negated that. All types of funds have computers with rudimentary artificial intelligence watching the news on key names. If a headline or article comes out that is bullish, they flood orders in within one second automatically. This basically makes it very difficult to profit for an individual trader UNLESS the news is major and it should affect the price over hours and days of time. In this case you can still jump on board. Figuring out which news will have a major impact is not that hard, but its still tough. Basically anything that is unknown and would majorly affect earnings is valid for this. For example, getting a super large contract that is unexpected (this is key, unexpected means you know the company ahead of time and know this was not in the pipeline or they were expecting 20 million only and got 90 million etc), a key drug approval or discovery (not pre clinical, these usually dont do much). Earnings that are way way above estimates (or way way below) can also cause a new trend to form in an otherwise dull stock, again assuming that the market did not anticipate this event. One thing to keep in mind if you play any stock based on news. If the news is good, and the stock SHOULD be moving up and instead its doing the opposite for a decent amount of time, caution is advised. You are not the only one to figure it SHOULD go up, but funds with larger shares think the other way. These guys are the ones who move the stock. If they think its an opportunity to sell, dont stick around and wait. If the reason for the entry was the news, but the price is not working, exit the trade and move on. Other people are trapped as well, and this tends to accellerate the trend in the perceived wrong direction. Often times its a subtle detail that the funds figure out that the average trader and even professional trader will miss, and this is why they are fading the news - or sometimes it does not matter, they just want to get out of a position regardless of the news, and the increased volume because of the news event helps them out. |
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