How to Use News Playing in Day Trading
All day traders, no matter what the method to their frenetic buying and selling, have to stay on top of developing news. If you use news playing to determine your trades, it is even more critical that you keep alert to global news briefs, which may necessitate several television news channels going at once or multiple computer monitors showing the top news channels, complete with alerts.
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Things You'll Need
- Multiple television stations (optional)
- Multiple computer monitors (optional, but highly recommended)
- Access to several real-time global news sources
Instructions
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Be the most aggressive newshound you know. Day traders using news playing cannot afford to be lazy. There are millions of traders all around the world watching the same news channels and listening to the same rumors you are, and some of them have been doing this for decades. You have to be ready to act at a moment's notice in reaction to either good or bad news.
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Know that some people buy stocks in a company when the news is bad, which is the opposite reaction to the one you'd expect. This is why you have to know the minds of the other traders. For long-term blue chip holds, such as car companies and the Dow fund, many traders feel confident that the people who hold these stocks are more conservative than those holding Silicon Valley securities, and they may sell in response to bad news. In contrast, more aggressive investors in chancy stocks may do the opposite.
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Watch the market. When bad news about a stock or an industry in which you hold stocks hits the market, and you believe you have a lead on other day traders, you can sell stock you don't own yet. This is called "short selling." You are paid the price for that stock, but you have a few days to deliver it. You then buy the stock before you need to deliver it at what you hope will be much lower prices.
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Make fast purchases of stocks you believe are on an upswing due to good news you have just heard. Then sell these stocks in a few days when you believe the reaction to the good news has caused the stock to reach its short-term peak. This is the opposite of the bad news short sell, but with both the timing of the trade is critical.
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Use news that is truly "brand new," not simply proof positive of earlier rumors. If the news is simply a rumor coming to fruition, then the news may already be calculated into the market price. You may not make any money trading it, since the market reaction to the news has probably already occurred.
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Use news playing for day trading only if you are willing to make a serious commitment to sitting in front of your computer monitors. If you are considering news playing and day trading so that you can have weekdays off of work, this may not be the trading methodology for you.
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Tips & Warnings
Since the price of a stock may have already reacted to rumors before those rumors even hit the news media, staying on top of breaking news may not be enough. You may want to subscribe to blogs and chat rooms that discuss market trends.
Know that all-day trading is risky! You are racing with hundreds of thousands of other people around the world trying to outpace and outsmart the market, and there are never any guarantees of profit.
