Guest Posts Investing

Make Money Trading The News


We don’t cover trading much here at Cleverdude.  This is often because stock trading is one of those strategies which is hard to get right.  However, trading can be an important part of one’s wealth building strategies.  So, if you have some money to invest and are willing to brave the choppyness of the financial markets you’ll probably want to come up with a trading strategy.

One way to do this is by building a trading strategy around timing news releases.   World famous investor Warren Buffet and notorious trader Jesse Livermore both made this approach part of their trading strategies.  While their techniques are highly focused, here are three kinds of news you can trade.

Payroll data releases

Traders should pay close attention to the Non-farm Payroll data that is released by the US Bureau of Labor Statistics each month. This data, which represents the total number of full-time jobs that the US economy generated in any given month, is closely watched by the markets because it provides a strong indication of the overall health of the US economy. The US dollar typically fluctuates when payroll data that deviates substantially from market expectations is released. For example, if the payroll data comes out much stronger than expected, currency markets may see this as a sign that the US economy is strengthening, and by extension, that the US Federal Reserve might raise interest rates, which in turn would generally yield an appreciation in the US dollar relative to other major currencies. By trading immediately following payroll data releases, investors can ride substantial swings in the price of various currency pairs.

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Interest rate decisions

Similarly, interest rate decisions made by central banks around the world represent a form of headlines that investors should pay attention to. Whether it’s the Eurozone, Australia, the United Kingdom, New Zealand, the United States or elsewhere, central bank decisions can have a marked impact on the price of related currency pairs. Investors should monitor closely the schedule of central bank meeting – most central banks meet on recurring schedules – and should trade related currencies around these meetings. They represent a strong trading opportunity because there is so much scope for large swings in the price of the underlying assets.

Company-specific announcements

Company-specific announcements represent a rich and high-volume form of headlines that traders should pay attention to. Such announcements can span a wide variety of topics – form quarterly earnings releases through to things like merger announcements and court case filings. By paying attention to company specific announcements and by trading immediately after such announcements are released to the public, traders can take advantage of large swings in the prices of the underlying assets (in this case, stocks). For example, if a company reports results that far exceed analysts’ expectations, this is often a good time to purchase a short-term call option in that company’s stock because markets are likely to react positively to the news, which will generally be received as a signed of a healthy outlook for the company in question.

In terms of some closing thoughts.  Investors can pay attention to headlines in order to get trading ideas across various asset classes – from currency pairs to individual stocks. As with all styles of trading, there is some risk involved. But by paying attention to what is going on, and by catching the news articles that markets reactive to in a major way, investors can ride big swings in asset prices which can provide to be extremely profitable.

For more on this check out our other postings on stocks:

What you should know about investing in stocks

Why automated trading software is the latest rip off

Loyal3 investment update #1

Starting my investment portfolio using fee free loyal3

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