Trading from the news

Making trading decisions based on live news is a popular way of trading. It is also one of the most difficult trading methods.

As a beginner trying to trade on live news will in most cases lose you money. There several factors why it is hard to win from breaking news:

1. Professional traders will have already placed their trades and moved the market as much as can be expected before you even finish reading or hearing the story.

2. It is hard to predict which way the market will move from news. Good news does not necessarily equal up and bad news does not necessarily equal down. A lot of price reaction to news is based on how the news compares to the expectation. In other words traders will have already ‘priced in’ the expected news before it is even released.

3. Around times of expected news (results updates, financial reports, etc) the market can become so volatile that you are very likely to lose by getting stopped out rather than winning anything.

If you want to be able to trade from the news you will need plenty of practice and a very good knowledge of how news affects prices.

Live news feeds can easily be obtained for free by opening a live or even a demo account from most brokers. Watch the news and how prices are affected. If you think you can correctly predict the price movements then you may be able to give news trading a go. If not then you should perhaps look to trade using a different method such as company fundamentals or technical analysis.