Trading the news is a technique to

trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. Traders generally negotiate through a medium of cr ...

equities Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion t ...

currencies A currency is a standardization of money in any form, in use or currency in circulation, circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use wi ...

and other

financial instruments Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...

on the

financial market A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial marke ...

s. Trading

news News is information about current events. This may be provided through many different Media (communication), media: word of mouth, printing, Mail, postal systems, broadcasting, Telecommunications, electronic communication, or through the te ...

releases can be a significant tool for

financial Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital the investor usually purchases some species of pr ...

Economic An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

news reports often spur strong short-term moves in the markets, which may create trading opportunities for traders. Announcements about corporate profits, a change in management, rumors of a merger, are events that can cause a company's share price to move wildly up or down. Interest rates, unemployment and export rates, or the

central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...

's policy shifts, can cause a deep change of an

exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

Methods

Manual

Investors trading shares of a listed company know there are certain events that cause the share price to rise or fall — sudden changes in energy prices, a labor strike at a supplier, a poor month for the sales, for example. Trading the news is the technique of making a profit by trading financial instruments (stock, currency, etc.) just in time, and in accordance to the occurrence of those events.

Automatic

Event-based

algorithmic trading Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of ...

, also known as programmed trading, is not a new phenomenon. This trading technique has been increasing in popularity since the early 2000s. As of 2009, studies suggested HFT firms accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.Rob Iati
The Real Story of Trading Software Espionage
, ''AdvancedTrading.com'', July 10, 2009 Algorithmic trading allows investors to fine-tune their computers to scan live news feeds and watch for items affecting any listed company.

Social networks in trading the news

Social information is now as powerful as proprietary data feeds. Today

social networks A social network is a social structure consisting of a set of social actors (such as individuals or organizations), networks of dyadic ties, and other social interactions between actors. The social network perspective provides a set of meth ...

are more than just a space to communicate and share ideas, it has become the information source that can rock financial markets to their ground.

Twitter Twitter, officially known as X since 2023, is an American microblogging and social networking service. It is one of the world's largest social media platforms and one of the most-visited websites. Users can share short text messages, image ...

alone provides an enormous opportunity for investors and traders: *After

Elon Musk Elon Reeve Musk ( ; born June 28, 1971) is a businessman. He is known for his leadership of Tesla, SpaceX, X (formerly Twitter), and the Department of Government Efficiency (DOGE). Musk has been considered the wealthiest person in th ...

tweeted about a new product line Tesla's shares leaped by 4% ($1 billion of its market capitalization); *On August 13, 2013 Carl Icahn tweets about his large stake in

Apple Inc. Apple Inc. is an American multinational corporation and technology company headquartered in Cupertino, California, in Silicon Valley. It is best known for its consumer electronics, software, and services. Founded in 1976 as Apple Comput ...

He claims that the company is extremely undervalued and adds that he urges CEO

Tim Cook Timothy Donald Cook (born November 1, 1960) is an American business executive who is the current chief executive officer of Apple Inc. Cook had previously been the company's chief operating officer under its co-founder Steve Jobs. Cook joined ...

for a larger

share buyback Share repurchase, also known as share buyback or stock buyback, is the reacquisition by a company of its own shares. It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders. Repurchases allow s ...

. As a result, Apple's shares surged 5% by the end of close on this day.

References

{{Reflist Share trading

Methods

Manual

Automatic

Social networks in trading the news

See also

References