Market news plays a vital role in setting the mood of the investors during times of high volatility in the market. Smart traders are keen with the market updates before closing or opening a position for most of the market players tend to assess the value of a certain stock and or asset based on the press releases of the companies or authorities involved.
Trading on the news is an effective strategy for all the traders, either the professional or the novice ones. It does not only enlighten the path of the asset, but it also provides necessary information to better understand the previous price movement. This strategy makes it easier to figure out the market potential of the traded instruments without getting too much detail on its stock market movement.
Whether we admit or not, there are circumstances during the trading period where most of the traders become lazy to scrutinize a trading platform to check the price action from the past until to the present. During these times, the best alternative is to the check the news on the asset that you are interested in. Whenever there’s new information in the market, expect the price adjustments- it may drift upward or downward.
Here are the lists of the market events associated with the market decisions of most of the investors.
1. CENTRAL BANKS’ MONETARY POLICY
One of the much awaited market reports are the decisions of the central banks regarding their benchmark interest rates. As the meeting approaches the financial market faces a great volatility depending on the comments of the members of the bank. If the majority of the officials of the bank signal a rate hike, expect the currency to blow up. On the other hand, if a negative rate or unchanged policy is what the members reiterate, the currency will fall.
Investors choose to trade safe haven assets in times of volatility. Gold would be first on their lists and other precious metals as well. As a trader, you have to consider an over-reacting market when these events are approaching.
The Federal Reserve greatly influences the global financial market since it is the central bank of the larger economy. For instance, the greenback edged lower while the gold rallied to a two week high as the investors became cautious ahead of the Fed meeting in September 2016. Other currencies such as the AUD and the NZD moved higher as the U.S. dollar remained vulnerable.
These market instances usually repeat over and over. Professional traders can foresee the future and can weigh in the possible trend of the currencies through the help of the updates from the market news providers. If reports say that the bank is more hawkish than you know what to do and what to trade.
2. OIL INDUSTRY DATA
Every week the investors look forward to the release of the reports from the US Energy Information Administration and from the American Petroleum Institute regarding the US crude stockpiles and inventories. In times of global glut supply, this information highly matters since they indicate the current supply level of the commodity.
When the inventories decline, expect a breather from the oil prices. In the week ended on September 23, 2016, the API reported a drop of US crude inventories, after which, crude oil prices recovered as investors gained enthusiasm over the probable rebalancing of the commodity. As a trader, you have to watch out these data to be able to predict the possible effect on the commodity you wish to trade.
Further, there are currencies which depend on the price movement of oil. These include the AUD, the CAD and the NZD. If the price of oil goes up, expect the relative influence in these commodity currencies. Having a direct relationship the commodities, reports on oil price action will give you hints over the possible movement of the currency that you trade.
3. EARNINGS REPORT
There are certain companies or stocks which trade higher after the release of their respective quarterly earnings report. When a stock shows better-than-expected revenue and earnings per share, the confidence of the investors comes back, thus the stock will trade with a green candle.
In the second quarter of 2016, Amazon, Alibaba and Apple were among the tech stocks which reported upbeat profit. Eventually, these stocks moved up in the following sessions. As a trader, this information should be considered in your list before trading. The good news is you don’t have to do the Math, most of the market news gives the percentage, the differences and the future outlook for the stock.
4. US ECONOMIC DATA
Part of the daily market news is the current condition of the largest economies. One way to gauge the health of a certain economy is through its economic data such as the Purchasing Manager’s Index, GDP, Inflation and employment and unemployment figures. These economic data has a strong relevance to the monetary policy decision of the central banks.
If you are a trader and you see that the figures get better, you may expect for a rate adjustment. Then, if there’s going to be a rate modification, expect a change of path of the currencies. Any movement of the currencies will affect the commodities in the long run.
5. POLITICAL CLASH
Political events and chaos also bring instability in the market. The 2016 US presidential Election affected the perception of the investors toward the future of the U.S. economy. Part of this, the stocks and other commodities were engaged with market volatility as the event caused division among the authorities. It was reported before that the Fed was delaying the rate hike in support of President Obama, before it got bigger, Fed Chairwoman Janet Yellen dismissed the idea.
Another political tension which affected the market was the terrorist attack in different parts of the world. These reported territorial chaos brought massive turbulence in the economy of the affected countries. It turned out the currencies and the stocks fluctuated. As a trader, you have to foresee the outcome of these events and market news provide the information right in there.
Even the political differences among oil producers countries have caused the delay of an output freeze. The OPEC has been calling out for a firm cooperation from the major oil kingpins to address the global glut supply. Due to personal reasons and associated conflicts, the organization is still far from its goal.
The greatest risks in trading on the news is the credibility of your news provider. Professional traders do not trust all the information they see on their screen immediately. You have to make sure that market news that you read provides only truthful information. Again, trading on the news can support your trading decision, but having adequate knowledge about the trading charts and indicators would be a great help as well. A good strategy and indicator would take you to tour financial goal.