Definition of News Trader§
A news trader is an investor or trader who bases their investment decisions primarily on news announcements. This can include breaking news, economic reports, and events that impact markets. News traders seek to profit from the short-term volatility that is often triggered by market sentiment surrounding these announcements, aiming to capitalize before the price action returns to its usual trends.
| News Trader | Technical Trader |
|---|---|
| Makes decisions based on news and announcements | Focuses on price chart patterns and trends |
| Trades on immediate reactions to news | Trades on historical price movements |
| Holds positions for very short periods | May hold positions for longer durations |
| Relies on sentiment and external events | Relies on technical indicators and analysis |
Examples§
- A news trader may buy stocks of a tech company ahead of its earnings report if they anticipate good results, expecting the stock to rise post-announcement.
- After a government report indicating a rise in unemployment, a news trader might short (sell) stocks in retail companies, predicting a drop due to reduced consumer spending.
Related Terms§
- Volatility: The degree of variation of a trading price series over time, often spurred by news events.
- Sentiment Analysis: The study of public opinion and its effects on the market, particularly relating to news.
- Market Reaction: The immediate change in stock or other security prices following news announcements.
Formulas and Charts§
Fun Facts, Quotes & Historical Insights§
- Did you know that news traders often joke about their work saying, “We don’t buy the rumor, we sell the news – much safer with a lawyer around!”
- Warren Buffett famously stated, “The stock market is designed to transfer money from the Active to the Patient.” News traders, however, would say, “Why wait for the money when you can grab it before it floats away like a hot air balloon!”
- Remember the infamous Black Monday crash in 1987? News traders literally felt the market’s gasps as algorithms and responses to sudden news sent the markets spiraling!
Frequently Asked Questions§
Q: What is the best news source for a news trader?
A: Preferably one that’s faster than a caffeinated squirrel, as timing is crucial!
Q: How can one become a proficient news trader?
A: Start by closely monitoring economic calendars and eventually mastering the art of the ‘screaming headline’.
Q: What types of news should a news trader focus on?
A: Focus on everything from earnings reports, economic indicators, political events, to nature’s unexpected flare-ups (e.g., hurricanes affecting oil prices)!
Suggested Resources§
- Books:
- “Trading on Sentiment” by R.J. Shook
- “The Candlestick Course” by Steve Nison
- Online Resources:
Test Your Knowledge: News Trader Challenge Quiz§
Closing thought: Dive into the whirl of market news, embrace the chaos, and just remember - if you can laugh through the price swings, you’re doing better than most! 😄📈
