Yes, I can explain the way we try to do it.
When we start the day, before the open, we try to get all the information we can. All that we believe could have an impact.
We never go against the news, whatever happens. If it' s good, we look to play it long, if it is bad, we look to play it short. If we think it' s not safe, if we think it may not be working, if we think it might not have any impact, or already be in the price or whatelse, we just avoid it.
I perfectly understand the scepticism of some. And they are of course right to be. Playing the news is not a martingale, I make bunch of mistakes, and have hard times. I certainly don' t pretend I do it perfectly. And we of course all know there are times when thing behave without any real logic.
Why did I get to do it then. Well, it started 4 years ago, when I started to trade. I was trading my domestic market, the belgian stock exchange (which really sucks
I think). I had been trying to short a stock, Electrabel, which is the local big utility company, based on some candlestick charts. It was not working (I was dealing with daily charts). The stock had been going up for at least 2 weeks because there was a rumour someone was about to bid for it. But I didn't know, and anyway wasn' t really taking care of those things at the time. I was technical. Looking for patterns. Having lost enough money, I quit the position (after averaging up, and not respecting some stops...). I was I think the worst technical trader there was. A real looser. I would say that today I' m still a looser, but less than before
Then , over the weekend, came the news that Electrabel was denying the rumour, as was the supposed bidder. The stock opened monday down just 0.5%, and sold off like crazy for a week. Having read the news on saturday, and still furious after that stock that was going up while the market was flat, I shorted it again. And it worked. This got me thinking. I started to look more and more at those things and switched to this type of trading. I sticked with it as I wasn't loosing money anymore. I had finally something I was comfortable trading with.
For what regards the method, it' s not too far from what anyone else is doing. The only thing is that, prior to the open, we get a plan done. We select some stocks, some sector plays, based on the news we get. Then we try to play them. Always with the news. If I' m not sure, I just leave it alone, and won' t try to play against it.
Also, you have those intraday developments, which can change the whole picture, like a damn rumour, Wayne Angel changing the probability of the FED acting before its meeting
so you must be ready to change your mind in seconds.
The big problem we face is the corelation to the market. If a crummy day is in the making, I won' t try to get long. I' ll better look for some short plays. And vice versa.
While some people will stick to some stocks/instruments, and trade them constantly, I just switch to the stock/sector in the news.
Of course, all this also requires some technical skills. But for example, I will not short a stock breaking a support of something like that. The technical event is not my trigger. It is the news.
It is not so simple. Sometimes, you have to wait for the good story to trade off. And sometimes, you' ll spend the day on the sidelines, which I still have problems dealing with
( I really envy the daytrader who knows he'll make money everyday, whatever happens, but I just suck at daytrading). That' s why I trade both Europe and the US. To be sure to have something to trade off on a daily basis. And then there are those great days, when you just don' t have enough margin to play them all!
But to those people saying most of the times the stock will not act like it should in regard to the news, I would just say : do you really expect any of your trades to be a winner? Any of your indicators to be perfect? No. It' s part of the game. It' s just like that. It' s up to you to deal with all this.
