When invested in the markets, keeping updated with news is essential to the success of your open and future positions. One cannot enter the industry with absolutely no knowledge on the history of the asset, or its current status, making manual trading a 24/5 job leaving a lot of people with headaches.
Thankfully, there are many well-known websites where one can keep himself updated on market news, including market signals, notifications, articles, etc. Bloomberg and Forex Factory being one of top, with constant alerts on market movements, and the ability to research ahead of time the large upcoming events on the markets and prepare your accounts and positions for the fluctuation to hit.
Events marked red mean high fluctuation – high impact expected. These events usually consist of monthly reviews on jobs/supplies, speeches from prime ministers/presidents/chairmen, conference’s, retail sales, and more. Analysts usually predicted the outcome of these events which gives investors an idea of the direction the market will most likely be headed towards, and operate accordingly.
There is a common phrase however, saying “Buy The Rumour, Sell The News”. This phrase holds a lot of wisdom to it. When a certain stock is doing well, let’s say Apple for example, rumours are spreading, word hit the news, and thousands of people are purchasing the Apple stock. Now, it’s most likely that by the time the last people are getting in on it, the stock is already overpriced, which means that the market needs to correct itself. Corrections are done by a sudden drop of the price, meaning, all those who were late for the party, don’t get the best spot.
This phrase is taken quite literally as seen with the Netflix stock. Analysts had been discussing the results for the last quarter of 2018, and had predicted pretty numbers. This got investors excited and the markets began to rise drastically as of the beginning of the new year. Shortly after, on January 10th, Netflix raised their subscription price, which ultimately means more money for the company, meaning higher returns. As of 10/01 until the fourth quarter was released, the Netflix stock rose 12% in just 1 week! Unfortunately, on the day of the release, the results did not contain the same predictions analysts had made earlier in the month and the Netflix stock lost a huge 6% in 1 day.
Those who were not up to date on market news and purchased Netflix stock late, were left standing on the opposite side of the market movement and lost a large part/their whole investment.
However, there were many people who did not buy a share and still made profit, those people were the ones who bought the rumour and sold the news, opened sell positions and indeed closed their trades in great profit.
This comes to show, that not only must an investor understand the importance of high fluctuation events and when is too late to enter, but the importance of staying informed on market news, learning how to decipher analysts predictions, and whether to buy the rumour and sell the news, or get in with everyone else. A large percentage of the time, when one falls behind on updates, statistics seem to show that it might just be better to sit back and watch the outcome as opposed to risking up to 100% of your investment, and simply catch the next train.