News Trader

Headlines hit. Stocks move. A trader takes advantage. That's pretty much the sequence of events that run behind day-traders who try to take advantage of fast news breaks.

A headline comes out: "Bomb Goes Off in Saudi Oil Field." All of a sudden, oil prices should spike, along with prices in service companies, transporters, and storers, and there's a precipitous rise or fall in countries exposed or not exposed to that headline.

The news trader tries to get ahead of that news. Like...if RDS.A (Shell Oil) is trading at $63.12 and the news hits, it'll pop suddenly to $65.23. The news trader will buy it immediatley, knowing that it's likely the big mutual funds that will then move that stock upward another buck or two by the end of the day or week, after which time the news trader will sell and move on.

Good work, as long as you're reading the headlines...properly. That spike when it came out that "Angela Merkel Has Bad Morals," and what it did to basically all of Germany's public companies...ended up being a costly redaction when it turned out that she had just come from the dentist, and the headline should have read, "Angela Merkel Has Bad Molars."

So yeah, you want to avoid those.