Trading On The Latest News
June 19, 2009 by Tisa Silver
Filed under Finance
On Wall Street, there has always been incentive to find new information first. The faster you find and act upon the news, the more money you stand to make off of the laggards.
Photo by Evan S. Photography, courtesy of flickr
So how much time do you really have?
In other words, how long does it take for new news to be reflected in a stock’s price?
Research suggests it takes less than 30 minutes for new news to be incorporated into a stock’s price.
Aside from the fact that the news is processed by other investors so quickly, there is no way to gauge how much value should be attached to a piece of news.
Often times, true value of news is initially misjudged and people either overreact or underreact.
In the case of an overreaction, if you get in early, you can attempt to cash out at the peak, but if you get in too late, you may be overpaying just as the stock is about to fall. So being around to catch the news is much easier than predicting its impact on the stock.
So, unless you are trading for a living, it may not be worth your time to try trading on breaking news. And if you go about getting your information the illegal way, you could end up losing more than your money. Remember what happened to Martha Stewart?
