News Trading Strategies

1. Trade each news release as an individual entity. 

News trading is only relevant when you are well aware of the type of news that correlates to the assets that you wish to trade. Always remember, not all news will give an equal impact on one another. It is important to focus on high-impact news that has a bigger opportunity potential. Examples of high-impact news are the NFP reports, central bank interest rate decisions, the unemployment rate, inflation, and political events. 

One of the recent events that fall in Sporadic news is The passing of the longest Monarch — Queen Elizabeth II. The impact of the news result, a day after the incident GBP/USD slip 0.3%, at $1.1506 while the euro rose 0.1% against the pound, to 86.85 pence EUR/GBP. 

As for the scheduled event, last September 23, 2022, had been scheduled for an announcement of the UK mini’s budget. As a result of the news, The British Pound against the dollar dropped as low as $1.049 on September 26, 2022, to a fresh 37-year low. In addition to the news, there are several following actions taken to counter the impact, such as the UK’s tax u-turn.

2. Develop trading strategies for specific news releases. 

It is important to understand the timing of your reaction to any news. You can place your trade prior to, during, or after the announcement. 

• Before – Indicate directional bias. It usually gives a higher return if your analyst is right. 
• During – It can be very judicious as the strategy is being implemented according to actual data. However, is no guarantee that prices will behave according to the expected direction as how the actual news release suggests. 
• After – The act is prudent as implementation is being made after seeing the market reaction. However, the impact might be too late to scoop. 

Interest rates are one of the most impactful news events across all financial assets. It usually give an almost immediate impact on various assets. In case of interest rates are hiked (the impact will be reversed if there is a cut in the rate). 

• Stocks/Bonds/Indices/Commodities – DOWN
• Local currency/Volatility – UP

Another good example is the employment rate. It indicates the necessary movement in the short run. A positive jobs report will prompt the central banks to keep interest rates high and vice versa. Here is the expected impact when there is a positive employment rate reported. 

• Stocks/Bonds/Indices – DOWN
• Local currency/Volatility/Commodities – UP

3. Develop trading strategies for specific news correlated to the investment asset. 

Stock Market

Important news events for stock traders are management decisions, share buybacks, earnings, future plans, acquisitions, mergers, and more. The news events can be tracked from official company websites or other major news sources.

For example, on April 4, 2022, when Elon Musk, Tesla’s CEO (NYSE: TSLA), announced his plan to purchase Twitter (NYSE: TWTR). The news sent Twitter’s stock price soaring to more than 27%. 

Forex 

Interest rates, economic growth (GDP), Federal Reserve rate announcements, and employment are some of the biggest news events that trigger the volatility of foreign exchange trading. Currency investors will later take advantage of the dispersal of the opening and closing price after the market reacted to the news.  

Commodities 

In commodities, the most important essential is supply and demand news. Announcements from major commodity bodies such as OPEC, stock, production, distribution, and also weather and natural disasters play an important role. Most commodities are priced in USD, then any news impacting the dollar is indirectly impacting the commodities trading. 

Bonds 

The most important news for bonds are interest rates, bond ratings, and bond yields. The yield metric can be used by bond investors to estimate their expected return before placing any trades. Plus, underlying bonds will be rated by rating agencies that might influence investor decisions. 

Cryptocurrencies

Crypto trader relies heavily on news. The most used channel for crypto traders is Twitter, Discord, and crypto news channel. There is much news that will trigger crypto investors’ decisions such as regulation, technology, updates, whale movements, and many more. 

There are also unexpected events that occur in the Crypto ecosystem. Recently, Solana-based DeFi exchange,  Mango Markets was hit with a $116 million hack. The event was believed conducted by the hacker by undertaking a “flash loan” attack. In this scene, the hacker used 2 different accounts to raise the Mango coin’s price. It is to manipulate their collateral on the platform to obtain loans from Mango’s treasury. They later place a futures position. 

According to Tech Monitor today, MNGO’s price rise almost 1,000% in a few minutes span, elevating the collateral value of the hacker’s account, which was then drawn upon, draining Mango Markets in the process. 

In particular, as of October 13, according to the data from CoinMarketCap- Solana’s price fell from $34.22 (October 6) to $29.32. A slump of 14.329%. Their market cap slipped over $1.43 billion to $10.6 billion or 13% from the $12.08 billion recorded on October 6. 

In particular, as of October 13, according to the data from CoinMarketCap- Solana’s price fell from $34.22 (October 6) to $29.32. A slump of 14.329%. Their market cap slipped over $1.43 billion to $10.6 billion or 13% from the $12.08 billion recorded on October 6. 

4. Market expectations and market reactions

Trading action due to market expectations are more important than the news itself. One of the popular strategies used that is based on market enthusiasm is fading. So, what is fading? It is a trading strategy of placing a trade in the opposite direction of the predominant trend as market enthusiasm begins to fade. A piece of positive news will most likely result in a sharp high opening stock price. Fade strategy investors will wait for the stock price to peak prior to the high spirit from the news and begin selling once the optimism begins to fade.