Is "Buy the Rumor, Sell the News" A Good Trading Strategy?
"Buy the rumor, sell the news" refers to a trading strategy where a trader buys a security based on speculation about an upcoming news announcement or data, and then sells the security once the news is made public.
1. Why we don't buy the news?
When a good news event comes out, and the price rises, entering on that good news release can potentially be the worst time to enter the market.
That is when everyone else who bought the stock at the lower price may be getting out of the market in order to reap a profit.
2. How to“Buy the Rumor, Sell the News”?
A common example is trading based on the expectation on a company's quarterly earnings report.
Perhaps there's a rumor that a company is expected to provide more revenue to shareholders than previously thought. In that case, traders will buy the stock quickly to take advantage of increased dividends or stock prices.
Once the company release its results and the stock rises on strong revenue, the traders will sell their shares to turn a profit.
3. This strategy might sometimes be inaccurate
Disadvantages of the strategy include lack of accuracy and potential loss of opportunity on decisions not made quickly enough
No one can time the market with absolute certainty and buy the rumor, sell the news trading strategy is no different. There can be a number of reasons why this strategy could fail to yield a profit for traders.
For example,
in a bear market a company that beats expectations in its quarterly earnings may still see its stock price fall because the good news may not have lived up to the hype.
$Baidu(BIDU)$ released its latest earnings this week. Although it beated expectations, the share price dropped after the results.
Do you think "buy the rumor, sell the news" is a good trading strategy?
How do you find trading opportunities?
Comment on this post and win tiger coins~
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🌟🌟🌟In principle, Buy The Rumor Sell The News sounds like an excellent trading strategy but is it? It is in anticipation of good news ahead for the stock but the reality is things can go awry. Then the stock price plummets and the trader makes a loss.
To me, it is like timing the market but as we all know, it is time in the market that counts. Investing is a marathon not a sprint. So what's more important is to buy quality stocks with solid fundamentals and a wide moat that will be resilient and grow exponentially in the future.
That's my investing style and it forms my fundamental strategy in growing my wealth for the long haul. It is definitely not Buy The Rumor Sell The News style!
@Tiger_chat
@Tiramisu2020 @BenjiFuji @Mrzorro @LMSunshine
For beginners or even experienced investors with conservative tendencies, it is better to avoid the "buy the rumor, sell the fact" strategy. Another reason to stay away from this method is that the moment before or after a news release is the worst time for trading because there is a contradiction between theory and reality.
Without any information coming from an insider, there is no way we can accurately predict where the lines are heading. Although the only thing that is certain in forex trading is uncertainty, said moment is much riskier than other situations. That is why taking advantage of market euphoria on news releases can be the worst moment to trade. @Tiger_chat
Stocks can potentially experience big price spikes based on speculation and rumors. Often, these hype-fueled spikes outweigh the reaction to actual news.
It doesn’t make sense at first. But a lot of things in the stock market don’t make sense until you study, learn, and start to understand how trading really works.
The stock market is forward-thinking. Most people are trying to anticipate what will happen in the future. I like to study the past and look for patterns. That helps me find ‘buy the rumor, sell the news’ plays that I can get in on and ride the wave of anticipation and hopefully generate profits. @Tiger_chat
@Tiger_chat @nickname168 @luv2trade
I look for trading opportunities by analyze intra-day chart. It is very important for me to diligently monitor intra-day chart to get a cue of when to enter and when to exit. @nickname168 @luv2trade @Tiger_chat
How about this?:
"Rumor ... BUY. Non-Rumor ... SELL."
Come and share your trading strategy and comment on these trading strategy. [Cool]
@LMSunshine @Mrzorro @Aqa @Fenger1188 @GoodLife99 @rL @SirBahamut @HelenJanet @pekss @Korer @JC888 @melson