Hi there,
I have a question about Trading the news, directional bias.
It says (in the lesson) that big players adjust their positions early on when a certain figure/number is released (unemployment rate…). What can then happen is that the market moves in the opposite direction as one would expect after the news is released broadly.
What I do not understand is why! If for instance the rate is expected to be worse (rate prediction forecast a higher unemployment rate for example) and it happens to be so (the announcement would not differ from the forecast), wouldn’t the big players sell and the price would drop, so that when smaller retail traders enter, the price would already be lowering? The lesson says otherwise that there would be a rise (price going up).
The lesson is not going into further detail here.
What am I missing here?
Best Regards,
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I haven’t been through this lesson but have experienced a thing or two in trading.
Price is driven by expectations: change sin expectations are driven by the news. So usually unexpected bad news changes expectations negatively and causes price to fall. However, I remember a presentation given by a CEO of a troubled company - said that when they suddenly announced they had eliminated the dividend, the share price started to rise: it never looked back. From the banks he learned the market had concluded that all the bad news was now out: also that the management were prepared to go to the most drastic surgery to find a cure.
Which goes to show that trying to anticipate market reaction to news is a losing game.
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using the example you gave, the adjustment in position has nothing to do with the immediate release. it depends on the overall picture, so context is important.
sometimes, when the news comes in as worse as expected, the big players will like to remove their old sell positions to allow the price rise to a higher. so they can then enter new sells. in this case, the market will rally. but this is more like a fake rally and soon the original downtrend resumes.
For the second case, sometimes when the news come far worse than expected or far better than expected, the big players do not want to wait for any new price. They continue executing at the current price. as you can see with what happened with the dollar pairs like EUR/USD over these past weeks.
Each news whether it was good for the Euro or bad, did not change the downtrend. any rallies in EUR/USD that occured as a result of a particular news event ended after a day or two. the downtrend continued.
the trend is like a cruise ship. a news report or economic release is like a tugboat, can’t change the direction of the cruise ship. only thing that can cause the cruise ship to change direction is a tsunami or hurricane.
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Trading the news is very difficult as a lot of things are already priced in and then some others aren’t as impactful as first thought to be. I think trading news/fundamentals is good on higher time frames but day trading its more a marker to stay out until its over
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basically if one wants to trade the news, then it’s very important to also factor in the current market structure.
was it ranging? was it trending? was the market waiting for this particular news to be the trigger to break out of its current range?
answer these questions and trading the news will become less stressful in my opinion. Cheers and happy trading!! 
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I agree.
But isn’t the conclusion from what you say that when price is in an established trend, its more important to just follow the trend and ignore the news?
(I am biased cos this is what I do…)
Thanks, these kind of infos are invaluable as they reflect real live examples
That would be an explanation for my example above and answer one aspect of the question to why price would move up instead of down (because sell Pos are being closed massively). So great info
I completely agreed with benettel as there are some giants (big investors) who move market intentionally and new trend may follow. After the news released, market volatility may rip you off in matter of second. These days, I avoid these kinds of trades.
Hope this also help…! 