Economic news, changes in policies, and unexpected releases of data usually have a strong impact on financial markets. Such events cause rapid shifts in prices that may provide opportunities yet pose a danger to traders. Lots of the losses in the news trading are not caused by the news itself. They are based on the response of traders to it without regard to the trading style.
The impact of trading styles to market news
Understanding market news in finance
Market news incorporates the economic figures, central bank announcements and financial surprises. Such events raise volatility and decrease price stability. During such occasions short-term traders are exposed to rampant spreads and slippage. Long term traders are also the traders who are likely to be under pressure in case of movement of prices in a way that is contrary to the expectation.
What is a trading style in finance
The style of trading entails the way a trader gets into, carries out, and gets out of the positions. It lays down time frames, risks, and rules of decisions. There are those styles that are fast run and there are those that are patience and confirmation based. The styles respond to big news in the market in a different manner.
How trading style affects reactions to market news
The impact of the trading style (รูป แบบ การ เทรด) on response to market news is important since it will make a trader trade in a disciplined or emotional manner. Weaknesses in strategy, risk control and mindset can be revealed through news events. Commercial traders that do not take note of this correlation tend to make the same errors in times of volatility. Volatility of news to different trading styles is varied. The knowledge of this relationship also assists traders to make decisions rather than make reactionary ones.
Common trading style problems during news events
Traders with many failures are due to the trading style that is not designed in response to sharp fluctuations. The result of this is inappropriate decision making and losses. Among the major issues that manifest themselves at the point of collision between the trading style and news conditions are:
- Poor risk control during volatility: A trading model in which risk rules are not strictly followed, tends to create excessive positions which are unable to cope with economic announcement induced price surges.
- Emotional decision-making under pressure: The traders may not work according to a plan, when the style of trading is not fixed by rules, then they turn to be emotional to respond to seemingly rapid shifts in prices.
- Overreliance on predictions: The results of the trading techniques that rely on the guess of the outcome are problematic since the outcomes of the news often do not reflect the expectations of the market exactly.
- Ignoring execution risks: When executing a style, many styles do not take into consideration the slippage and expansion of spreading, which is popular at high impact news events.
- Lack of flexibility: When markets do not act as per normal conditions then a strict trading style cannot work.
How to avoid common news trading failures
A lot of failures reported in the financial education guidelines arise as a result of not considering structure. The failures are recurrent since traders fail to change their style of trading.
The following are viable methods of mitigation against failure:
- Stick to predefined rules: Trading styles that have well predefined rules avoid emotional exits and late entries in times of news volatility.
- Avoid chasing price movements: News driven price changes tend to revert and the impulsive trading styles are the most affected.
- Accept uncertainty: Probabilities, and not certainty, are what successful trading styles are all about, particularly in the case of major announcements.
Concluding
The style of trading is direct in influencing the reaction of traders in response to news about the market. Poor alignment results in emotional decision making, overloading of risk and wastage of losses. The traders are given the ability to deal with the news events with a lot of control through the adjustment of structure, risk, and discipline.
