Should you Believe in News Releases?

One of the requirements when becoming a trader is keeping yourself up to date. Financial news releases are reported everyday. Apart from reported profits, forecasts by so called gurus and interviews by CEO provide information about the company that you may be investing or trading on. It is known that whatever happens in the news are mere confirmation of what's already in the market, but what about new releases?

The market reacts to news releases in different ways. How it reacts though, will depend on the news. A specific news release will affect a particular company. When companies confirm their profit guidance, stocks usually go up. In other cases, a broader news can affect markets throughout the world. For example, when there's a debt crises, local banks can get hit hard because of their reliance on wholesale funding.

If you're a day trader, you will either avoid trading in the meantime due to possible quick movements in both directions, or weather it out and continue. Deciding to trade or not to trade will depend on the system that you are using. If your trading system is composed of elements that can be affected by the news release, such as the range of the most recent bar, then its advisable to step out for a while. But if your trading system is devised to insulate you from the news, such as price patterns with several bars, then you can trade.

If you are confident enough that your own technical analysis of past market movements will suffice, then you have the option to continue trading despite the new releases. But if your guts are telling you otherwise then you can step away and trade until the conditions are better.