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CHAPTER 9:
News Trading
ews Trading. Again, this is where
you will want to be paying
attention to the happenings of the financial world. When big
news hits regarding a stock that you are informed enough about
that you are able to generally predict its market moves, take advantage of
the moment by buying or selling. This should usually be done very early in
the day, shortly after the market opens up
since that is when the news
usually will first come out. If you wait until later in the day, everyone will
have gotten a feel for how the market is reacting and thus may not be so
eager to sell or buy. The day trader’s
objective, however, is to take
advantage of small, yet drastic moves within the market, and so buying or
selling when the market is at its most volatile may be of the most use to
you. It is important to remember not to get ahead of yourself though. Be
sure to think through each trade calmly and rationally, avoiding making any
passionate decisions that you may later pay through the teeth for.
A word of warning however: there is a difference
between news trading,
which is legal, and trading on information that you already know ahead of
the market. If, for example, a friend tells
you that tomorrow morning
company XYZ is going to file for bankruptcy,
you would be tempted to
immediately sell your stock for a hefty profit before it collapses. But to do
so before the company announced it would indicate illegal activity.
Similarly, if you decide to scalp (different from the first strategy), then you
are purposely talking up or down a particular security causing the market to
change and then taking advantage of it. That would also be viewed as
unfavorable by authorities. Don’t do it.
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