News trading — or trading the news — is a term that traders commonly use. But while you may have heard it regarding the forex or the stock market, it applies to all trading types, including commodity trading and crypto trading. However, does it work?
News trading can be profitable, and it can work. However, you have to constantly scan the news, be aware of news reports before everyone else, and interpret news reports the right way to detect upcoming changes. If you’re a beginner, copy trading and mirror trading might be better alternatives.
Today, you’ll learn what trading the news is and how to do it. We’ll also talk about whether it works or not and whether it’s profitable. So, without further ado. let’s get into it.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
What Is News Trading?
Trading the news, or news trading refers to making trading decisions based on news releases. News releases are critical because they can quickly shape how a currency pair or stock fairs. For example, if a successful company faces a billion-dollar lawsuit, the stock price may go down. If the company announces an expansion or a successful entrepreneur plans to buy them out, the price might go up.
The same goes for currency pairs. If unemployment rates are on an upward trend, their currency might go down in value. On the other hand, if their GDP is currently growing, their currency might go up instead. Decisions by central banks and other news releases can also impact the value of a currency.
The same goes for crypto assets. For example, when Elon Musk tweeted about DogeCoin, its price went through the roof. The same happened when he tweeted about Bitcoin and put the hashtag #Bitcoin in his Twitter profile. However, when he said that the price of Bitcoin was too high, the price fell. If you were paying attention as these things happened, you could’ve profited even more by buying or selling at the right time.
By staying up to date on the most recent news releases, you can make the right decisions as to which stocks, crypto assets, or currency pairs to buy and which to sell.
This video explains how to trade the news:
Does Trading the News Work?
Trading the news can work if you do it right, but the trick is to make sure you don’t trade too late. By the time you read about something on CNN, it’s already too late to jump on the trend. For example, if you were to see Elon Musk’s tweet about Bitcoin as soon as he tweeted it and bought it right then, you would have enjoyed seeing the price of your Bitcoin assets rise.
However, if you only bought Bitcoin after learning that Elon Musk tweeted about Bitcoin on your nightly news show, you’re a little late to the party. That’s the perfect example of why trading the news requires you to listen to the news in real-time and make trading decisions quickly.
The same goes for stocks. Once the news of a company’s downfall reaches mainstream media, its stock price might already be in freefall. You need to know about a lawsuit or other problems that the company has right away before the price starts falling drastically.
If you can focus on finding the sources used by news outlets before they’re reported on TV or the internet, you’re much more likely to profit from the experience. Find your favorite public companies and research when they’re merging with other businesses, selling more stocks, releasing a new product, and so on.
News trading can be profitable if you know where to look, but major news channels are almost never the first source of information.
Why Trading the News Is Hard
Trading the news can be very hard to do, and it also requires a lot of time. Successful news traders often use algorithms that scan the news for tidbits about the companies they hold stocks in.
The same goes for forex traders; they’ll constantly be looking for news updates and making trades accordingly. This also requires a lot of time. The forex market is active 24/7, but you have to sleep, and you can’t always trade the news.
You also have to be aware of all news updates. If you only see one news article and don’t get the whole story, you might make the wrong trading decision based on what you know. Doing this right can be difficult. You have to have many news sources available to make the proper decisions, and not just rely on one.
News Trading vs. Copy Trading
News trading can be very time-consuming, so you might want to consider another type of trading that gives you more time to do other things. For example, copy trading is automatic and involves copying the trades of a successful trader, who might be scanning the news for you and trading accordingly. So, you won’t have to do anything.
When that trader sees bad news about a currency pair and makes a trade, your account will make that trade as well, in real-time. Copy trading is also great for beginners because they might not know how to interpret news articles correctly, which could cause them to make bad or even impulsive trading decisions on what they think is trending.
News Trading vs. Mirror Trading
Mirror trading relies on automatic trading based on algorithmic strategies as opposed to trading based on news releases. The idea here is that indicator-based strategies are more accurate than news articles, as past behavior can predict future behavior, regardless of what a temporary news article might say.
Mirror trading takes the strategy of a successful trader and automatically applies it to your account. Like copy trading, you won’t have to spend time doing any trading yourself, so mirror trading is perfect for people who don’t have much time, as well as for beginners. It requires more trust in specific traders rather than major news networks.
Trading the News for Beginners
Beginners can also trade the news, but they’re more likely to make innocent mistakes. For one, they might interpret news articles incorrectly or might not know how to get the news quickly before it makes its way to the major news media outlets. For example, they might not be reading company press reports or disclosures.
Beginners can make money trading the stock and forex markets by reading and following the news. However, most beginners will be better off doing copy trading or mirror trading, as it doesn’t allow for as many mistakes as news trading. You can also diversify your trading assets so that you do all three types of trading.
You can set up a practice account available from many brokers and trade the news using fake money. That can give you a feel for how trading the news would work in real life, and it can allow you to learn how the market reacts to various news reports and make the right decisions. You can learn through the experience without putting your precious money on the line.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
News trading can be profitable and can work as long as it’s done correctly. However, it takes effort to scan the news constantly, and it’s always possible to get news releases too late when the company’s stock or the crypto asset has already fallen. Copy trading and mirror trading are two good alternatives because they don’t require you to watch your account 24/7 or any experience to do them.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
Affiliate Disclosure: We participate in several affiliate programs and may be compensated if you make a purchase using our referral link, at no additional cost to you. You can, however, trust the integrity of our recommendation. Affiliate programs exist even for products that we are not recommending. We only choose to recommend you the products that we actually believe in.
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