News versus Noise

Learn to Resist Media Babble

As a day trader you only need to worry about news if it's going to directly affect the stock(s) you're intra-day trading. Other than that, don't allow the media to influence your stock picking and trading activity.

My number-one rule regarding news is very simple: if your stock is trading abnormally because of recent news releases, then stop trading it on that day. Sit on the sidelines and wait until the craziness settles. For the most part, news and economic reports will immediately affect trading activity on Wall Street. Your job as an independent day trader is to not be in a trade when the news that just hit the wire is making that stock go nuts.

Your job is to be fully aware of when the news hits the wire. But keep in mind, later on I will be showing you the strong swing levels; those levels typically will get broken on days of big news. I am a pro-trader so I know which levels to trade and which not to trade. This is the hardest part of my system to train you on. But for now safety is key. If you're not sure, then simply don't trade that day. Better to be safe than sorry.

How to Monitor News and Economic Reports

• The most important press release on all stocks is the economic reports, particularly quarterly earnings. You must have these dates on a calendar—this is paramount. You do not want to be trading on the day of an earnings release. On that day your stock will most certainly have abnormal volatility. Simply trade your other stocks and wait till the next day to begin trading that stock, after the market has responded to the earnings report. Don't try to predict how Wall Street will respond to the numbers. A stock like LNKD can fluctuate 30+ dollars in 60 seconds after earnings is released, breaking all intra-day support/resistance levels without any retracement. You don't want to be part of that parabolic climb or drop.
• Keep in mind that earnings release dates change several times leading up to the original date. Typically they're pushed out rather than bumped up. Keep rechecking.
• How to find this data is simple and free. Simply go to Yahoo Finance. Click “News,” then click the “U.S Earnings” tab, and type in your stock symbols. This will give you the next date your stock will be releasing its quarterly earnings statements. Mark your calendar and plan around that date.
• There are several other news releases that can affect your stock during intra-day trading, including:
  • Fed interest rate cuts/hikes
  • Core product issues
  • Merger talks
  • Class action lawsuits
  • Bankruptcy announcements
  • Employee strike threats
  • CEO resignations
  • Governmental interventions
  • Chief competitor advancements
• The news examples above can be found by keeping the CNBC Business News Channel on all day while you trade. Especially watch when there's a countdown clock on the bottom right-hand side of the CNBC screen.
• You should always run a quick news search on each of your stocks, every morning before trading.

In general, if the news isn't that important to your stock, then your volume on that morning's trades will be normal and the MSNBC talking-heads will not be discussing it.

Here's a great example of news that will affect your stock when it gets announced in real time. Let's say the GM CEO reports that they plan to start producing all-electric cars next year. This would not be a great day for TSLA. You would want to exit immediately, either at a profit or a stop-loss. The last thing you'd want to be in that situation is a deer-in-the-headlights trader, doing nothing, freezing up. And you wouldn't want to trade that stock again until Wall Street, not the news, decided what to do about it. The point is you must know your stock very well, and know which news is only noise and which news can and will affect the current day's stock prices.