c07 JWBT016-Busby October 1, 2008 21:9 Printer: TBD
CHAPTER 7
News Pays
T
raders—especially day traders—live for big news events. News
moves markets. Home sales are lower than expected and the mar-
kets sell off. The Consumer Price Index data indicates that inflation
is threatening the economy. Traders fear that the Fed will raise interest
rates to keep prices under control. Stock prices tank. Likewise, if good
news is reported, the markets salute the numbers and go up. Therefore,
traders need to understand how to use news to make money. News is so
important to the markets that I plan my trading week around the major
reports that will be released. I want to be informed and ready when the
numbers are known so that I can maximize the moneymaking opportunity
that is presented.
Many governmental and institutional economic reports are published
each month. These reports cover all aspects of our economy. Some studies
gauge manufacturing output; some count new home sales, housing starts,
or existing home sales; while others track consumer habits like spending
or confidence. Many of these reports are released at the same time each
month. That is, some may be released on the first Friday of the month or the
third Thursday, and so on. Therefore, a trader has the opportunity to know
when important news is being broadcast, and he or she can be prepared to
trade it. The first step to using any news strategy is learning the day and
time when the information will be made public. The easy way to do this is
to keep a calendar and use the calendar to benefit from the news. Following
are some of the market-moving news reports to watch and possibly trade.
Consumer confidence is one of the important gauges of perceived mar-
ket health. There are two reports that traders watch: theConference Board