Investment Strategy - Trading the News

Trading the News strategy is based on an analysis of the news related to a certain stock (or some other financial instrument). The good news usually imply that the stock price will rise, and the bad news imply that the stock price will fall. The rule is quite simple: sell if the news are bad, buy if the news are good.

There is a great variety of news that can influence a certain stock: an announcement about corporate profits, a change in management, a rumor about a merger, the results of a rival firm or even the sport news. It is hard to track all the news so an investor is usually focused on a certain type of equity. Even that is difficult to handle, so it is usually necessary to focus on a few stocks.

All the news have some degree of accuracy. The rumors are usually less accurate, while the reports are very accurate. Even reports can be inaccurate but it is less probable, because someone may have to face sanctions if they hide something.

Also, all the news can be more or less important. For example, the invention of a car is very important for a railroad company, and the invention of a computer is not that important for an undertaker.

The third aspect of the news is how frequent you can get it. For example, you can always find a rumor about anything, especially on the Internet. On the other hand, financial reports are available quarterly.

The fourth aspect of the news is how fast you can get them. This is a very important aspect, because when you notice the news, it is usually to late to do something. Meaning that if the news are bad, the price of the stock have already fell down. In order to follow this strategy you should be almost always online looking for the news.