What is News Trading?

by James Hendrickson
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Trading and investing demand a whole range of strategies. What works one day may not work another day. You want to ready and loaded with mutliple techniques to approach the market each day, so you can be as diversified as any good portfolio. Having a lot of different ways to make money is just sound business, no matter what industry you are in.

What is news trading? Basically it is an investmetn technique where traders use the news releases and movement of information in  the financial space to make moves in the market. Trading on news releases can be lucrative, if the timing is right and traders have a good understanding of how particular news could help or hurt a stock.

Not just earning releases either. Economic news can propel moves in the marketplace, which in turn can create opportuinites for traders to capitalize on. Often, a federal jobs report will spur spikes or dips in particulat sectors, based on the numbers you might find. For instance, if the jobs report indicates an increase in service sector jobs, especially in the quick service restaurant industry, then that bit of information might be useful to a trader enmeshed in restaurant stocks.

News trading is just another way of traders looking to profit off information. That is one of the key aspects of being a trader: being able to digest information quickly and efficiently enough to make entries into the market and profit off those trades. The skill is one that takes time to develop and cultivate. And news trading might be one of the harder skills to develop, because the speed of news is so much greater than it was even a decade ago.

When you are news trading, you are either buying a security or commodity after major news breaks or shorting it, depending on your strategy and the type of security. It is a good strategy to work on from time to time, because being in the trading or investing game means that you are always looking for ways to make profits. And sometimes, even workable stratagies can peter out, leaving you with a hole in your arsenal. News trading can be a good technique to have on the bench in case you need to give your profits a shot in the arm.

Forex is a sector of trading that can be particlularly lucrative for short-term news traders. Forgien exchange markets are huge, which means that many investors have large postions that they cannot easily  liquidiate, especially in the wake of a major global news event. The upside for day traders paying attention is that you can jump on certain stocks or commodities just after relevant news breaks and hold it for minutes at a time. That can still result in profits because even in the digital age, markets are not instantly self-correcting.

When you break into day trading or swing trading, you need a backpack full of usable strategies that will provide you with ammo every day that you are in the market. The market can be a complex and wild entity, capable of enormous leaps and bounds. The ability to ride those leaps and bounds is one that is highly desired. In order to develop that capability, you need the intellectual flexibility to move from topic to topic and trade to trade without  losint your edge. This takes time to learn how to do. It is possible, for those with the dedicationg, but it is not for the faint of heart. When you add news trading to your list of techniques, it makes you that much better of a day trader.

For more information on the differences between investing and trading, look to this resource for picking the right platform that will match your risk appetite and strategy.

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