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Profit from the News in Day Trading
Many investors miss out on stock opportunities because pertinent news breaks when they are working at their day jobs. For those whose work takes place at the trade station it is common to profit from the news in day trading. The amount of profit from the news in day trading will commonly depend upon how quickly one finds the news, how clearly one understands the impact of the news, and how rapidly one enters trades. There are a number of profitable day trading strategies, all of which can be applied at times in order to profit from the news in day trading. The first part, however, is to understand the news.
Understanding the News
In order to routinely profit from the news in day trading the trader needs to understand what the news means in regard to stocks, commodities, or currencies that he is trading. For example, a trader who has analyzed the fundamentals of a stock that is a takeover target will have a better grasp of how a stock price will react when a hostile takeover is actually announced. When the cost of crude oil goes up it raises the cost of doing business in many industries. Having a clear idea of just how much profit XYZ Company will lose due to higher energy prices will give the trader a clear idea of how much XYZ stock will trade for in the near future. Being at the trade station when the news breaks and understanding the news lets you make the right trade and profit from the news in day trading. If you are adept at range trading in day trading you will feel comfortable with anticipating the new range that XYZ will trade in and profit thereby.
Technical Analysis of Market Reaction
Although you may have a clear idea about how much higher energy costs will hurt XYZ Company the broader market may not. As such there will commonly be a period of volatility in XYZ stock price. Using technical analysis to gauge market sentiment a wise trader can profit from the news in day trading. Scalping in day trading is a viable strategy when you are able to do rapid technical analysis of the market response to news about XYZ.
Often times it is fairly predictable that the price of XYZ will overshoot in response to the news, over correct, and then finally settle into a new trading range. Here is where technical analysis is helpful and where being at the trade station for the duration of XYZ stock volatility is essential. While otherwise successful traders and investors may prosper from their efforts it is the trader whose day job is at the trade station that most commonly can profit from the news in day trading. The issue is often more one of being there that of having deep insight. Good news drives stock prices up and bad news drives them down. Being there at the right time allows the day trader to profit from short term market inefficiency which is common after breaking news about a stock, commodity, or currency.