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Trading with news

Discussion in 'Trading Strategies/Systems' started by dlineinvestor, Nov 25, 2014.

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  1. dlineinvestor

    dlineinvestor

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    How many use live data feed news to take some of your trades ?

    Would be interested in hearing your stories
    Examples of what news works for what markets
    What news feed you like using

    Below was a 390.00 move for me based on news
     

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  2. rimtas

    rimtas

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    The only thing anyone needs to know about news-they do not and can not turn the trend in the opposite direction. So If you had a good news that sported a spike up in a falling trend-it's a good short. Usually news are the result of the past, and they are already counted into the market prices. A few examples:

    The stock reported bad earnings-most likely before it was trending down or sideways.
    Another one- there is a major terror attack at US-most likely stocks were trending down for a very long time, expressing a negative mood which at the extreme turned into action.

    Let's try something force major, not related to markets. Say that there is a major earthquake somewhere and tsunami just wiped out the entire foreshore of at least few continents. How markets will react to this? No reaction, it will stay within the trend, to the surprise for anyone thinking that it should start crashing.

    News has only an impact on a very, very small time frames, and people make decisions based on them only those who are unaware where the trend is or what the market is doing. Others just watch, but take no actions. The simple backtesting of news on a chart will tell the true story of their forecasting value, which is 0 (zero) That's my take.
     
  3. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Another way to play the news in a contrary way is to play on the stops accumulated below the area where the market took off, where you might place a stop if you were trading with the news....:2twocents
     
  4. dlineinvestor

    dlineinvestor

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    Romtas
    ? This thread is about the above question your point is valid in another thread
     
  5. dlineinvestor

    dlineinvestor

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    Canoz
    Can you explain this, how is it contrary if the market took off (long) the stops would be safe ?
    Are you referring to watching the bids and offers then noticing the bids getting hit ?
    Cheers,
     
  6. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    In your example the stops on the longs would be at 9860 or below....get short there later on if the market can't hold...
     
  7. skc

    skc Goldmember

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    A very widespread view - but it generally fails to distinguish betwen real new news (e.g. a oil strike) and old reported news (a fall in earnings that is within existing guidance). It also doesn't apply to events where outcomes were binary (e.g. due diligence outcome of a takeover offer).

    Plus not all news are the same. News carry different weights relative to the market's current set of issues... so a 0.25% interest rate cut (which should be positive) during the GFC provides a good shorting opportunity because it is dwarfed by the bigger problems at hand. On the other hand, a grand Abenomics scheme was geniunely transformational with the Japanese market up 55% in a few months since the introduction. This is the reason behind why "news" related to futures markets are commonly believed to be less relevant... because there is a high proportion of news that carries too little weight relatively speaking.

    To "backtest" news without these context would yield useless results.

    Sorry... can you explain this. A negative mood at the extreme turns into action for the terrorists? I didn't know they follow the stock market so closely!

    I think you will find that the Jap market did crash after the 2011 and 1995 Kobe earthquake. Regardless of what trend was beforehand, it went a lot lower.

    http://www.bespokeinvest.com/thinkb...tock-market-post-kobe-earthquake-in-1995.html

    Here's the forumla for trading news.

    Price reaction = actual news adjusted for expectations. Expectations are expressed in various places. E.g. management guidance, analyst consensus, current spot price of the metal etc, but also importantly, recent trading leading up to the news.

    So to trade news... you need to know how to analyse the actual news (let's face it, some people can't understand a lot of what the news is actually saying, let alone the implications) and you need to know the current expectations. Without these you won't find much success.

    For stocks, the ASX announcements is most commonly used. For general economic news, the Squawk is a "radio station" like service for traders. For other news like 9/11 or earthquake, Squawk would probably cover most but social media would give you more detail and quicker ongoing updates.
     
  8. dlineinvestor

    dlineinvestor

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    Yes you could do that, in this long I was a tad late on entry waiting for confirmation of momentum.
    I heard the news then got in once momentum showed.

    Do you use live news in your trading ?
     
  9. rimtas

    rimtas

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    I told you-do a back-test. You didn't. And even you say that "regardless of what trend was beforehand, it went a lot lower". Which is not true.

    Let's see what happened exactly. 1995 Kobe Earthquake, Japan.


    kobe.jpg


    Trend was down at this time frame, earthquake did not disrupted or reversed or accelerated that trend in any way. So the event didn't had any consequences on the stock market-it remained within the trend.



    Another one- 2011 Japan Earthquake and Tsunami.


    eart.jpg


    The magnitude of event was great, but it did not reversed a rising trend nor it accelerated a downtrend. Market at that time was in the middle of sideways correction, and it already started to fall down even before earthquake. And regardless of devastation on the ground, a stock market regained all of its value just a few weeks later.

    So "the news", as in 1995, had no any effect on stock prices as everyone expected at that time. I remember the stories of news reporters and analytics who claimed that a nuclear disaster that followed would have a long term negative impact on the economy(and stock prices).
    Just 2 years later Nikkei has doubled. So much of the disaster.




    Ok, let's take something more. 2010 ash cloud over Europe that disrupted an air travel for weeks. Also, everyone expected that airline companies will have a major losses and European economy overall will collapse . Instead, stock prices remained within a rising trend, and from a chart you can't even tell where the "crisis" was.


    ASH.jpg




    You can take any natural or man made disaster and see that it has no any long term impact on stock prices. As I said, "the news" had only short term reaction from people who are unaware of the trend. News can not reverse market trend s in any way.
    And anyone trading the news usually throw in the towel sooner or later, because theyrealize that this is not the method that generate stable results. For one man the news can be good, and the same news for another can be bad.




    Yes, mate, it can't be much simpler. People in bear markets get angry and that's when most of the terror attacks, wars and clashes occurs. And you will be surprised to find out that usually all these negative events happens near the bottoms of the bear markets-it takes time to turn negative mood into action.
    There were almost no terror attacks and wars in bull markets, and especially near tops. So throw your irony over the board, and check first.
    Stock market is an indicator of the dominant mood in society overall, it is not just a tape with prices. You can use stock market to predict the news and events, not vice versa.
    Cheers,
     
  10. Macro Polo

    Macro Polo

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    You might be referring to only stocks - which can go a bit overboard on sentiment alone or get in to bubbles and so forth, but for most other markets news/data is the dominant driver.

    For example in Bonds and FX, of course a surprise rate cut or stimulus announcement can turn a trend - all it takes it for the market to be sufficiently surprised. This happens all the time and I could pick out plenty of recent examples such as when the taper was announced, when Mario Draghi hinted at easing in May... basically whenever a central bank surprises the market in some way.

    IMO it is not good advice to ignore the news - I don't think news events like man made disasters are the right kind of news though... You need to be looking at monetary policy and real economic factors that drive the market over the medium to long term rather than those that just affect sentiment without a lasting fundamental effect.
     
  11. skc

    skc Goldmember

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    The OP's question was trading with news. Whilst he didn't specify a timeframe, I'd say 2 years was probably NOT something he had in mind. The immediate aftermath of the events was that the market got sold down heavily. That makes it a trading opportunity as a result of the news. Where it ended up 2 years later hardly matters.

    Thanks for laying out the logical for all to see. People can make their own decision on whether they agree and apply this kind of thinking to trading with news.
     
  12. >Apocalypto<

    >Apocalypto< 20.03.2012

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    Dline,

    trading the news well you can try but i think it's very hard. i have made straddles before that worked well.

    prob is market fails to run you can get double filled and trapped. I have never looked at or tried to trade news in the futures.
     
  13. dlineinvestor

    dlineinvestor

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    Hi, yes well before this thread I tried straddles for the news, I guess if your settings are too close or the news causes whipsawing it could cause strife.
    These days I wait for the good quailty news feed to call some thing out and boom the market reacts depending on the news, some times in a whipsaw but some times straight up for example in the DAX 30 points in 2 seconds and continue.
    You can see some thing building in the price action before hand while you know the announcement is coming.
    If price action is biased I will take a position.
    Nothing works everytime but a type of confirmation can be in the prior price action.

    Doesn't seem to be many that use a live news feed. This is just one tool anyway.
    SKC mentioned that different news need to be weighted differently I totally agree with that.
     
  14. lesm

    lesm

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    Hi Dl

    I have done some trading around news time, but it is very selective.

    The feeds I use are Reuters and Bloomberg.

    I receive Bloomberg notifications on my iPhone. You quickly learn to be very picky about which ones may be of interest.

    Mainly use them for trading spot and the DAX.

    As skc mentioned the news has different weightings.

    Using the news feeds also provides you with more localised news, which does not appear on the news announcements list on the calendar. Some of these can have a short term impact.

    For news which has an impact on the market the move can last from minutes to one or two days. It will then normally revert back to the mean once the initial reaction subsides.
     
  15. DeepState

    DeepState Multi-Strategy, Quant and Fundamental

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    Although the example that has been given was selling a pop against trend post some news announcement, the following relates to the mirror, which I take to be a valid example.

    The fall of Bear Sterns was probably the single most important piece of news in the last decade. This event, and the downstream impacts, moved markets severely and for a very material period of time. This was counter to any trend that had been in place before the announcement. It was all you needed to know in the last decade to become very rich or to save a fortune over any reasonable timeframe that is not an immediate price reaction. The impact below is shown for the equity and credit markets. Obviously many related markets became dislocated as well. It would be difficult to argue that the markets forecast the news given their reaction followed the news.

    I believe that news has the potential to break trends and has done so. This doesn't mean that it always will.

    2014-12-01 23_59_41-Bear Stearns - Wikipedia, the free encyclopedia - Internet Explorer.jpg

    To the OP. Trading fast moving news is very hard. NFP and the like are just pops on a short term horizon. They are muddied by large scale trading dynamics in some markets that reduces profitability towards the trading spread limit. Forecasting news via hard yards analysis is definitely possible. Also, looking at how prices have reacted to news can yield possible opportunities in the medium term if the move is not commensurate with the news released. There are certain types of news and certain markets where news is not instantly impounded. These offer a decent chance at making money from news. But, from here, DYOW. Nothing here says that you will succeed in doing so or be more successful than trading technically. I just know that news can be useful..but nowhere near all of it is useful. Let me know when you figure that out. I'll buy your book.
     
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