Chapter 7. News Pays
Traders—especially day traders—live for big news events. News moves markets. Home sales are lower than expected and the markets sell off. The Consumer Price Index data indicates that inflation is threatening the economy. Traders fear that the Fed will raise interest rates to keep prices under control. Stock prices tank. Likewise, if good news is reported, the markets salute the numbers and go up. Therefore, traders need to understand how to use news to make money. News is so important to the markets that I plan my trading week around the major reports that will be released. I want to be informed and ready when the numbers are known so that I can maximize the moneymaking opportunity that is presented.
Many governmental and institutional economic reports are published each month. These reports cover all aspects of our economy. Some studies gauge manufacturing output; some count new home sales, housing starts, or existing home sales; while others track consumer habits like spending or confidence. Many of these reports are released at the same time each month. That is, some may be released on the first Friday of the month or the third Thursday, and so on. Therefore, a trader has the opportunity to know when important news is being broadcast, and he or she can be prepared to trade it. The first step to using any news strategy is learning the day and time when the information will be made public. The easy way to do this is to keep a calendar and use the calendar to ...
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