Updated: Apr 10, 2021
Welcome to yet another article regarding advance option trading. In our previous article, we had discussed one of the most important topics in options trading strategy was Price Volume action theory. If you have not read that article, you should go through with that once. It will be very helpful for you.
Moving on, In this article, we are going to learn about how local news changes the stock market scenario. We will discuss how you can expect the news especially the local news, the national news to understand what is going to happen because you understand the stock market moves on a leading indicator, and news is a leading indicator. So, you have to understand what is the news which is going to impact the stock market and what is the news which is just too much and nothing will impact on it.
We are going to understand what is behind the news? What is the meaning of that news and then we can have some kind of better knowledge to understand the thing? Sometimes I feel that the market reacts more sharply on news especially the bad ones. It is going to impact the market for a particular company and its shares. I think you should have really kind of strategy be ready for that intensive profits from such movement.
You have to understand that you are the last person not the first person to understand the local news. It is going to be interesting to know that how the same news a common person interprets and an export investor interprets. They have a different interpretation of the same news.
Stock prices go up and down all the time due to fluctuations in supply and demand. If more people want to purchase a stock, its market price will go up. If more people are willing to sell a stock, its price will go down. The relationship between supply and demand is highly careful to the news of the moment.
Nonetheless, pursuing the news is not a good stock-picking idea for the individual investor. In most cases, professional traders react in the prediction of an event, not when the event is being happened. As we all know that negative news will normally force people to sell the shares. A bad earning report of the company, a failure in corporate governance, big-picture economic and political unpredictability and unfortunate things happen all translate to selling pressure and a decrease in the prices of many if not most of the shares of the company.
Positive news will normally cause most people to buy stocks. Good earnings reports of the company, a declaration of a new product, a corporate investment, and positive economic indicators all translate into buying pressure and an increase in share prices of the company.
As noted, professional traders spend much of their time trying to expect the next news cycle, so that they can buy or sell stocks before the real numbers come into the picture. They use several sources of information in this task.
Care current on important news is more critical than ever, especially if you have investments that are easily forced by world news. The difficult part is categorized through all of the available news to get to the updates that are most salient to your life. There is one beautiful quote which states as “Uncertainty is the only certainty in the world."
This quote is most commonly applied to stock markets. As Indian markets have displayed in recent times, volatility makes stock markets extremely difficult to forecast. People find out that an increase in optimism in local news forecast a short-run increase in local stock returns while more pessimistic news is related to a temporary decrease in local returns.
Stock prices are finding out in the marketplace, where the seller supply meets the buyer demand. But have you ever thought about what drives the stock market — that is, what facts affect a stock's price? Sadly, there is no clean equation that tells us exactly how a stock price will move in the future.
That said, we do know a few things about the forces that move a stock up or down. These things fall into three categories: fundamental factors, technical factors, and market sentiment. But somehow, the local stock market news also put an impact on the stock market movement.
The thing is, the markets react uncertain with regards to many things. Sometimes they go up during geopolitical uncertainty and sometimes they go down. Even if they go up or down in the short-term., it is a lie to suggest they affect the long-term investment. You cannot blame people for accepting this, as the financial media always tell them otherwise.
The welfare of the news is more to the long-term investors. They can analyse their stock for long-term investment based on local news and its effect on the company stock. However, if you want to trade in the stock market, first you should have a clear mindset about the things that can impact the stock market. Like some of the local news is going to impact the stock prices.
Different types of investors depend on different facts. Short-term investors and traders tend to absorb and may even prioritize technical factors most of the time. Long-term investors prioritize fundamentals and accept that technical factors play an important role.
In final words, I would like to tell you that Investors who believe strongly in fundamentals can bring back themselves to technical forces with the following popular argument: technical facts and market sentiment often overcome the short run, but fundamentals factors will set the stock price in the long-run. In the meantime, we can expect more exciting growth in the area of behavioral finance, especially since traditional financial theories cannot look to explain everything that happens in the stock market.