How News Affects Price
When news happens in the financial world, things happen in the financial markets. A lot of financial news is known in advance. A lot of this news affects price. Sometimes, however, breaking news happens that causes things to happen that would normally be considered odd.
On March 13th, 2020, United States President Donald Trump made a speech at 3:30 pm Eastern Daylight Time about COVID-19. During this speech he declared a National Emergency, and promised all sorts of aid to help fight the virus.
If you watched the S&P500 during this speech, this is what you saw.
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The green arrow shows when the news networks cut into programming. Mr. Trump started speaking one minute later. In those first 3 minutes of his speech, the S&P500 fell 25 points. However, as he said things that the institutional investors wanted to hear, the price then went up. Way up. It went up 181 points in the span of 25 minutes.
This is the perfect example of two things.
- If you don’t keep track of what news events are coming up, you might be stopped out of a trade.
- If you don’t keep an eye on the news for breaking news events, you might also be stopped out of a trade.
Remember, news is an excuse for “them” to move the price to whatever level they desire. If you keep up with what’s going on you have a much better (though not foolproof) chance of not losing big on any open trades you may have.