Trade to Win - Proven Strategies to Make Money

c07 JWBT016-Busby October 1, 2008 21:9 Printer: TBD

News Pays 89

economic reports and the exact times that reports are released, you may

want to visit http://www.barrons.com or the site of my trading educational fa-

cility at http://www.dtitrader.com. We also keep an economic calendar for our

students so that they can be ready for news.

Obviously, if you are going to trade news and use these market-moving

events effectively, it is imperative that you know the dates and times when

the reports and data will be released. Keep your own economic calendar

and use it to schedule your trading time.

PEARL 10

Know when important economic data is being reported. Then use that informa-

tion to make money.

Never Predict the Market

Losers predict—winners react. More than one trader has lost his shirt by

trying to guess the market’s response to news. I never try to predict the

news, and I never attempt to anticipate the market’s response to news.

Experience has taught me the dangers of such a policy. Any experienced

trader knows that there are times when seemingly good news is aired, but

the markets expected better so there is a sell-off. Or bad news breaks and

investors were prepared for the situation to be even worse, so in the after-

math of the bad data, the markets rally. Having observed this phenomenon

hundreds of time, I have learned to wait for the numbers and the market’s

reaction; let the market lead the way, and follow.

Once the numbers in a particular report are known, there is generally

a rapid and very pronounced response. Prices may surge up or down in

seconds. Then, after a couple of minutes have passed, traders have digested

the information and may have a more measured and calmer reaction. For

that reason, beginners should never trade news. It is too easy to get on the

wrong side of an immediate and irrational response and lose money. News

spikes are generally very brief. I always advise beginners to wait a couple of

minutes after the news has aired, then assess the market and make a move.

Strategies for Early News

In the United States, 7:30AMis a prime time for the release of a variety of

economic reports. The CPI, PPI, GDP, retail sales, and housing starts are

only a few of the major reports that are published at this time. To maxi-

mize trading, consider the time of day and the information and indicators