Maria Bartiromo is one of the most prominent business journalists in the United States. She has worked for several prominent television companies such as CNBC and Fox. She is married to Jonathan Spielberg, founder of WisdomTree Investments that has more than $40 billion in assets under management. In 2001, she published a book titled, Use the News. The book was aimed at traders and how they can use the news to successfully beat the market.
This example shows that news is important to markets, and that is why investment companies such as hedge funds and mutual funds are prepared to pay more than $20000 per month for the Bloomberg Terminal. The rule is that the faster you are at receiving information, the more advantage you will have as a trader.
For example, if a company announces better results, chances are that investors who are the first to receive the news will rush to buy the stock. If you wait, you will be late, and miss the best gains from the rising price. Another example is when a merger and acquisition deal is announced. The stock of the company being acquired usually rises to the announced acquisition price. If you are not among the first people to receive the information, you will be late in acquiring the stock.
Therefore, as a trader, there are a number of things you need to do when trading the news. First, you need to have the right technology that will make you be the first to receive the news. As a beginner, affording corporate platforms like Bloomberg Terminal and Reuters Eikon is out of most traders’ reach. Instead, you should have access to Twitter, the Wall Street Journal and other business sites. Also, you should have access to business TV channels like CNBC and Bloomberg.
Second, you should use local websites to find ‘hidden’ news. For example, if you are a trader specializing in trading the USD/JPY currency pair, you should visit news sites that specialize in Japan. Doing this will give you an indication of the news coming out of the country. The same is true when you are a crude oil trader. You can visit news websites focusing on countries like Saudi Arabia, Russia, and Iran. Doing this will give you local information before it becomes major news.
Third, you should be able to interpret the news well. This is a common problem among many new traders. For example, during the earning season, they take the headline numbers and use them without taking time to look at the fine print. For example, a company like Facebook can beat on revenues, EPS, and even raise guidance but if the number of active users is falling, the stock will decline. Similarly, if the US Federal Reserve raises interest rates, the dollar might weaken if the accompanying statement sounds dovish. The same is true in every metric in the economic calendar.
Fourth, you should listen and read to other peoples’ analysis but always use your own thinking when making trading decisions. In mid-2018, a Bloomberg analyst said that crude oil will end the year at more than $100. This did not work out. The truth is that TV pundits are paid to talk and most of them don’t buy whatever they recommend. Therefore, while you should listen to their opinions, you should always make independent decisions.
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