Trading the news

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Trading the news is a technique to trade equities, currencies and other financial instruments on the financial markets. Trading news releases can be a significant tool for financial investors. Economic news reports often spur strong short-term moves in the markets, which may create trading opportunities for traders. Announcements about corporate profits, a change in management, rumors of a merger, are events that can cause a company's share price to move wildly up or down. Interest rates, unemployment and export rates, or the central bank's policy shifts, can cause a deep change of an exchange rate.

Methods[edit]

Manual[edit]

Investors trading shares of a listed company know there are certain events that cause the share price to rise or fall — sudden changes in energy prices, a labor strike at a supplier, a poor month for the sales, for example. Trading the news is the technique of making a profit by trading financial instruments (stock, currency, etc.) just in time, and in accordance to the occurrence of those events.

Automatic[edit]

Event-based algorithmic trading, also known as programmed trading, is not a new phenomenon. This trading technique has been increasing in popularity since the early 2000s. As of 2009, studies suggested HFT firms accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.[1][2] Algorithmic trading allows investors to fine-tune their computers to scan live news feeds and watch for items affecting any listed company.

Social networks in trading the news[edit]

Social information is now as powerful as proprietary data feeds. Today social networks are more than just a space to communicate and share ideas, it has become the information source that can rock financial markets to their ground. Twitter alone provides an enormous opportunity for investors and traders:

  • After Elon Musk tweeted about a new product line Tesla's shares leaped by 4% ($ 1 billion of its market capitalization); [3]
  • On August 13, 2013 Carl Icahn tweets about his large stake in Apple Inc. He claims that the company is extremely undervalued and adds that he urges CEO Tim Cook for a larger share buyback. As a result, Apple's shares surged 5% by the end of close on this day. [4]

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