5 Tips for trading the news
News are essential for the markets to work, they keep everything moving. So, for a trader it is important to be able to read and analyze news correctly and then act on it. Therefore here are 5 tips on how to handle news and act on it:
- When you read a news headline always ask yourself two things. With the news out can the company make money on those news? If you answer this one with a “No” then everything stops here and you can go on and read other news. But if you answer the first question with a “Yes” then you have to ask yourself “when”. When can the company mentioned in the news make money on those news. Both questions need to be answered in the news, only then you have a chance to make some money on the news.
- Find news containing some kind of licence agreement like “FDA” approvals. If the FDA approves for a new development in one of the hot biopharma companies, shares of these companies tend to go up. The same holds true for any other kind of licence agreement, as long as this licence is needed to earn some cash.
- Get in the habit of following the newsflow as far as insiders go. There are several reasons for an insider to sell stock so most often it is a waste of time to follow up on these and sell shares in a company where insiders sold some of their shares. But there is only one good reason for an insider to buy stock of his company, he or she might know something that we don´t or he or she thinks that the shareprice must go up and therefore the insider is buying. Get in on these trades, most of the time they are rewarding.
- Find news that bear the potential to move the stock later on. For example you have a high rising stock on the move, no chance it will fall down and you read about balance sheet inregularities for the first time, put this stock on a holding list, check it regularly and start moving in on it when things cool down and the shareprice starts falling. That could be happening one week from now or one year from now but get in the habit of checking these things regularly.
- Up to this point we don´t know where to look for news so here is a short list of good starting points:
www.yahoo.com/finance
www.briefing.com
www.wsj.com
www.investor.com
www.stockconsultant.com
www.bloggingstocks.com
www.seekingalpha.com
www.cnbc.com
www.cnnfn.com