Trading the news is an integral component of investing strategy. Day traders trade the news several times during a trading session, whereas longer-term investors do so occasionally. Regardless of your investing horizon, learning to trade the news is an important skill for astute portfolio management and long-term performance.
There are two principal ways to trade the news:
a) Having a directional bias: When a speculator has an explicit expectation of direction in a given market it is defined as a directional bias. Directional bias is also defined as a probability enhancer. In the presence of a bullish directional bias, long setups are more likely to achieve success than they might be otherwise.
We should mention what consensus and actual news. The news which will affect the market is usually anticipated, day or maybe weeks before it’s released analysts will already release their forecast – whether the numbers will have a positive or negative sentiment. Forecasts are not universal or uniform, different analysts will have different interpretations of things but you can expect that there will be one number that most of them will agree on – this is called a consensus. When the news is finally released and therefore the figures are given, then this is often the actual number.
b) Having a non-directional bias: Non-directional trading strategy is that the best choice for traders who don’t want to back the direction of the markets or individual stocks.
In conventional trading method the traders use to think that market runs during a single direction and predict prices accordingly to shop for and sell things. Directional trading strategy little question may be a very risky especially when the market runs within the other way . This is when the role of non directional trading strategy comes in.
With non directional trading, you do not care which direction the underlying is moving. You can make money in any market.
Here are a number of the foremost popular non directional strategies:
- Calendar Spread
- Iron Condor
- Butterfly Spread