The effect of the news on the stock market is often clear and obvious.
Good news about a company such as strong financials, strong company leadership, new launches, etc, may result in an increase in purchases of said companies shares.
On the other hand, negative news reports about poor financials, poor business decisions, the economy declining, etc, may result in a company’s shares being sold and therefore losing value.
Below are three main ‘categories’ of news events which may potentially affect the value of an asset:
Company News:
Company news is any kind of news that is specific to the company whose assets are being considered. This may include;
Financial statements.
Company reports.
Key business decisions.
Or even the competency of the company's management.
World News:
Although less obvious than company news, world events are also able to change the valuation of an asset. Events such as;
Natural disasters and war can change the price of an asset.
For example, the prices of stocks in the energy sector might drop if a hurricane were to hit.
Although these types of events are rare, it is important to keep in mind how a major world event might affect the value of your assets.
Economic Data:
News that affects the economy as a whole will greatly impact the asset market, from Forex to Equities. One example of this is an interest rate change.
If the Interest rate decreases, many investors look at this as a catalyst for growth as it then costs less for businesses' to borrow money.
Businesses' can now finance numerous growth opportunities, such as operations, acquisitions, and expansions at a cheaper rate.
This increases their future earnings potential.
Which in turn, leads to higher share prices.
Anything that makes it seem as though the economy is unstable, such as an increase in unemployment or inflation, may decrease the valuation of assets that are involved in that economy and vice versa.
Using the keywords given below will allow you to implement news events in your strategy:
Actual
Data on the economic event as published according to schedule.
Forecast
Analysts’ average expectation for the upcoming economic data.
Previous
‘Actual’ rate as published at the time of the previous occurrence of the event.
Check out the below video to learn more about trading on the news.
*Please note that all screenshots and examples are only shown for the purpose of a technical demonstration and should not in any way be construed as recommending any type of trading strategy and they do not constitute any form of advice. Please click here for further explanation.