news

oustriker · Oct 23, 2002

I have a newbie question.

I've heard of several traders who trade on news. It seems to me that a news announcement(s) would drastically increase volume for that stock, which is why you would want to trade on news - it's going to do something. So, my question is, what is advantageous about watching the news waiting for some big announcement as opposed to looking for large spikes in volume?

Avalanche · Oct 23, 2002

Originally posted by oustriker
I have a newbie question.

I've heard of several traders who trade on news. It seems to me that a news announcement(s) would drastically increase volume for that stock, which is why you would want to trade on news - it's going to do something. So, my question is, what is advantageous about watching the news waiting for some big announcement as opposed to looking for large spikes in volume?

They are trying to front-run if you will, that spike in volume. If you are good, that spike in volume is you selling what you just bought (or buying what you just shorted).

DTK · Oct 23, 2002

I'm going to have to revert to my days as a consultant and say 'it depends'. Here's my take.

Depending on what your time horizon is and how much influence that news has will determine the profitability of trading in the direction of the move. If you have a good source / are quick to get it, you could participate in the volume spike itself. If you wait for the spike to happen (once again depending on your timeline), there becomes a possibility that the event gets priced into first move. For eg. TXN yesterday. If you waited for the volume move on the earnings announcement, you would have been in perhaps shot at yesterdays close of 14 and it will probably fill up the gap before it goes down again. If you shorted after the announcement, you could have had a price north of 14 and closed it early the next morning for a profit as the people who were late to the news were still selling. Once again it depends on your timeline.

Don't know whether that helps or if it was even coherent, but there it is.

Originally posted by oustriker
I have a newbie question.

I've heard of several traders who trade on news. It seems to me that a news announcement(s) would drastically increase volume for that stock, which is why you would want to trade on news - it's going to do something. So, my question is, what is advantageous about watching the news waiting for some big announcement as opposed to looking for large spikes in volume?

Tony01 · Oct 23, 2002

Originally posted by Avalanche

They are trying to front-run if you will, that spike in volume. If you are good, that spike in volume is you selling what you just bought (or buying what you just shorted).

Right. Many times I've entered a trade when the news first hit the wires and exited as CNBC finally reports on it. That is usually the last little pump before it reverses.

One thing is that you should know ahead of time what will be perceived as good/bad news whether it be earnings,economic numbers,lawsuits,FDA approvals/rejections,etc.

Tony

OPTIONAL777 · Oct 23, 2002

Trading on news is really the only way to trade.

Ever try trading on "olds?"

oustriker · Oct 23, 2002

Originally posted by Tony01

Right. Many times I've entered a trade when the news first hit the wires and exited as CNBC finally reports on it. That is usually the last little pump before it reverses.

One thing is that you should know ahead of time what will be perceived as good/bad news whether it be earnings,economic numbers,lawsuits,FDA approvals/rejections,etc.

Tony

Sounds logical, but what I guess I'm wondering also is if there is all this sudden news (for this examples purpose, this occurs intraday and not at the end of the day/overnight), then the general public will jump on the bandwagon (either long or short), could you not get in right after the trend starts and get out before it's over? If you could get the news fast enough - by fast enough I mean before the masses of public, not necessarily to beat out other traders, could you ride that trend for a very very short time?

candletrader · Oct 23, 2002

To trade on news you gotta be somewhat of a dedicated newstrader to sift through the real time stories and asses them as they hit the wires... newstrading therefore involves not only the ability to execute quickly but the ability to analyze the relative importance of a story... I know of several people who make a living just trading news, but you gotta be the sort of person willing to read a thousand or so real time headlines everyday, looking for the few gem plays... if you have a Bloomberg terminal you can use that to sift for news plays.... if you don't wanna invest in a Bloomberg, there are cheaper options, such as the Newswatch program...

dojibear · Oct 23, 2002

Originally posted by OPTIONAL777
Trading on news is really the only way to trade.

Ever try trading on "olds?"

lol

Usually, keyboard online traders trade on 'old' around lunch time.
You could wait for the last guy to enter his online market order while finishing his baloney sandwich before going back to work, and short the stock.

Tony01 · Oct 23, 2002

Originally posted by oustriker

Sounds logical, but what I guess I'm wondering also is if there is all this sudden news (for this examples purpose, this occurs intraday and not at the end of the day/overnight), then the general public will jump on the bandwagon (either long or short), could you not get in right after the trend starts and get out before it's over? If you could get the news fast enough - by fast enough I mean before the masses of public, not necessarily to beat out other traders, could you ride that trend for a very very short time?

Sure, that's momentum trading. Entering on momentum is a good play if the news is very unexpected.However it's riskier than entering before the move especially with listed stocks. Listed stocks tend to gap on news(move in increments of 10c or more),so you'll be chasing the stock 20-30c before getting filled. Once the momentum is gone, LOOK OUT! You should exit once momentum slows.

Tony

Tony01 · Oct 23, 2002

Originally posted by candletrader
To trade on news you gotta be somewhat of a dedicated newstrader to sift through the real time stories and asses them as they hit the wires... newstrading therefore involves not only the ability to execute quickly but the ability to analyze the relative importance of a story... I know of several people who make a living just trading news, but you gotta be the sort of person willing to read a thousand or so real time headlines everyday, looking for the few gem plays... if you have a Bloomberg terminal you can use that to sift for news plays.... if you don't wanna invest in a Bloomberg, there are cheaper options, such as the Newswatch program...

This is very true. News trading used to be a big part of my profits in 2000. Most of the stories back then would move stocks sharply. Today few stories are real "gems." The best news plays these days are on the economic #'s like ISM,cons. conf.,jobless claims,etc.

Tony