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How important is news in trading
date 09/17/07 time 8.03 pm
Just as all traders are somewhat technical in nature even if they don't want to admit it, most of the technical traders, or at least the good ones, have some fundamental founding also. Consider what the stock market is for a moment. It is a large group of people who represent a lot of money that come together at specified periods to wager bets on what the future prospects are for a large number of companies. In other words, the market is a discounter of all events and actions that may affect all publicly traded companies. Although it is important that you don't attempt to trade off the news (more about this below), it is equally important that you are aware of the news. Let's make sure we understand this.
You cannot fully appreciate why the market trades as it does if you are in a news vacuum. This is true for the market as a whole and in the market for a particular company. As such, you do need to stay abreast of the various news events that are constantly feeding into the market. At the same time, you are an outsider, and the odds of you knowing or being able to trade profitably off of any one news event is nil. There are far too many large traders, brokerage houses, etc., who have far greater capabilities to both dissect any given news event and swing into action faster than you. So if you think that's the way to make money, forget it. For example, if auto stats are greater than expected yet the stock prices of auto stocks fall, you need to weigh this information and take note. In such a case, the market has already bought the rumor and is now selling the news. The market constantly discounts the expected. You will not make as much money on the expected. The market has usually discounted it before you do. You make the good money on the unexpected. You make big dough leaning against the crowd. To do this effectively, you need to develop and adapt a thesis on the market trend at all times. Good traders trade with the trend and great traders can sense the end to a trend and turn with it. Regardless of the time frame, trend trading is the heart of technical analysis and is where the money is made and lost. Preparing yourself to constantly examine news feeds and to constantly adapt your thesis such that it is supported by the facts emanating from the constant barrage of news feeds is the way to excel. Having said that I wish to add the fact that I read 7 papers inside out daily and yet have to come to terms with why the markets move the way they do. What I concentrate is on how I can help myself with the way it is moving rather then why it is moving. Let that help udayan and team make lots and lots of money.
The news feeds are everywhere and I will not point out specific ones here. As mentioned above, there are television feeds as well as a multitude of Internet sites available, both free and subscription based. It behooves you to begin reading and monitoring business news if you intend to be a serious and profitable trader.
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