in advance of the jobs report or after its release. This reactive or proactive approach to an important event or piece of news, of course, depends on a number of factors, such as whether the investor has a high degree of conviction about the markets near-term direction, risk tolerance, trading approach (passive or active) and. Earnings reports: It is generally advisable to have a trading strategy in advance of an earnings report, because a stock can bounce around in a much wider range post-earnings, as compared to the swings in an index after a data release. Key points to note are avoid taking an unduly large position, and have a risk mitigation strategy in place to cap losses if the trade does not work out. For example, an investor with a 15 position in a big-cap technology stock that is trading at multi-year highs may decide to trim positions in it ahead of the earnings report, so that it now constitutes 10 of the portfolio. During times of geopolitical uncertainty, it may be prudent to rotate out of more speculative instruments and into higher-quality investments, and consider hedging downside risk through options and inverse ETFs. Consider the plight of the many hapless investors who were so spooked by the unrelenting tide of bad news in 2008 that they exited their equity positions near the lows, incurring massive losses in the process.
Trading the news, then, should be an integral component of your investing strategy. While day traders may trade the news several times in a trading session, longer-term investors might do so only. News-based trading strategies News is the strategy factor which affects prices of financial assets, everything else is secondary. Trading, owing to the huge volume of news information continuously released by modern electronic communication, it news increasingly difficult stocks process all the information in a timely manner. Trading the news, then, should be an strategies component of your investing strategy.
Trading the news, then, should be an integral component of your investing strategy. The impact on specific asset classes was typically as shown in the table: Asset/Instrument Immediate Impact Equities Bonds US dollar Volatility Gold (no clear trend) Commodities (no clear trend) Payroll numbers above expectations: Implies that the Fed may scale back the pace of asset purchases. Regardless of your investing horizon, learning to trade the news is an essential skill for astute portfolio management and long-term performance. Know when to "fade" the news : Many times it is as important to ignore the news or fade it as it is to trade. An alternative option could be to buy puts to hedge downside risk. This may be preferable to taking the risk of a steep decline post-earnings if the stock is unable to meet investors high expectations. The investor playbook for trading jobs data in 2013 could be easily based on predictable market reaction, which was as follows: Payroll numbers below expectations: Implies that the Fed would be forced to keep interest rates low for an extended time period. Stocks who was looking to hedge potential downside risk could have done the following right after the Feds Oct. Two savage bear markets within the first decade of this millennium have made many investors question the wisdom of adhering to a buy and hold strategy for stocks. Best Buy (nyse: BBY ) is a great example of a stock where ignoring the steady drumbeat of bad news, and focusing instead on its valuations and turnaround prospects, would have paid off handsomely.
While day traders may trade the news several times in a trading session, longer-term investors might do so only occasionally. News-based trading strategies News is the prime factor which affects prices of financial assets, everything else is secondary. However, owing to the huge volume of news information continuously released by modern electronic communication, it becomes increasingly difficult to process all the information in a timely manner. For those of you who have done news trading in the past, you are probably familiar with the news, yellow, green system of news importance.