Article Categories

»	Arts & Entertainment
»	Automotive
»	Business
»	Careers & Jobs
»	Education & Reference
»	Finance
»	Food & Drink
»	Health & Fitness
»	Home & Family
»	Internet & Online Businesses
»	Miscellaneous
»	Self Improvement
»	Shopping
»	Society & News
»	Sports & Recreation
»	Technology
»	Travel & Leisure
»	Writing & Speaking

Reprint Article Code

Category: Articles » Finance » Article » Article Code

(Options) Part 2: The Simple (Basics of Stock Options Trading) - Trading with the Market Trends - Ne

News, good or bad, trumps all other market trends. Good news about a company, or about another company in the same sector if the sector is a hot one, can trigger sharp rises in stock prices. The key to taking advantage of price runs started by news is to get in early, before everyone else has. Obviously, if you're the last one in, you'll buy at the highest price and then watch the stock price go down. Likewise, bad news can send a stock's price plummeting. And, like everything else market trends, are not whether the news is ... read more

Article Title:

Article Body:

News, good or bad, trumps all other market trends. Good news about a company, 
or about another company in the same sector if the sector is a hot one, can 
trigger sharp rises in stock prices. The key to taking advantage of price runs 
started by news is to get in early, before everyone else has. Obviously, if 
you're the last one in, you'll buy at the highest price and then watch the stock 
price go down.
Likewise, bad news can send a stock's price plummeting. And, like everything 
else market trends, are not whether the news is really good or bad, but what the 
market perceives it to be. You might not think the market trend's reaction to a 
piece of news makes any sense, but should not affect your trading. Always go 
with the market. Remember, news overrides all other trends. 
Let's say you're holding a company heading into its upcoming split. The stock 
options is in a hot sector, and it's a one to four split. The stock options is 
rising nicely, and the ex date is three days away. The next morning, you see 
unexpected news that business in the company's sector has dropped off sharply in 
the last quarter and that this slowdown is projected to continue for at least 
the next six months. What's going to happen to the split run? This news will 
take precedence over the split trend.
Unless the market trends decide it doesn't care about this news, which is not 
likely, the company's run is over. You will have to get out of the stock 
options. When important news comes out, all successful traders abandon trades 
based on other trends. Unexpected news is one of the main reasons why you must 
set stops on every trade to protect your capital. In the same way, if you've 
sold short to ride a trend in which stocks usually go down, significant good 
news about the stock options should send it back up.
Now that we're on the subject of news, let's look at a related trend: 
sympathy plays. When a stock options in a hot sector has good news and begins to 
move up, the stocks of the other companies in the same sector will often start 
to run up as well in sympathy with the original mover. Likewise, when a stock 
options has bad news and begins to fall, others in the sector will often start 
to trend down as well. It may seem strange, but there is a reason for the market 
trends to act that way. 
You would think that good news for one company would be bad news for its 
competitors and would logically drive their prices down instead of up. This 
isn't how the market trends work. As long as the news reflects well on the 
prospects of the industry or business the news making company is in, it will 
generate a sense of possibility in the minds of market trends' traders. If one 
company in the sector is doing well, it's possible that demand for the whole 
sector's business is growing or that the whole sector will develop its products 
or market trends so that all the companies in the sector will do well. It's 
possible, isn't it? The sector now has 'potential.' And that's all the market 
trends needs to hear.
A great way to evaluate sympathy plays is to look at all the stocks in the 
sector to see whether others have started running with the newsmaker. If so, 
look for stocks that haven't moved as much, for stocks that should also start 
running but haven't yet. By buying slower movers, you'll get in at a good price 
and the stock options will have most of its run left. But make sure there's no 
other factor keeping that particular stock options from rising, such as bad news 
of its own that will keep it from following the sympathy trend.
Remember, news overrides other trends. Sectors go through hot and cold 
phases. Knowing which sectors are hot is especially useful in uncertain market 
trends. Whenever there's a sudden general market trends rally, only the stocks 
in the hottest sectors will participate in the rally. Stocks in cold or dying 
sectors will remain flat or neutral.
Always be aware of which sectors are hot or 'in play' so that you're ready to 
trade into the right stocks when the market trends rallies. At the same time, be 
aware of which stocks are overvalued so that you'll know what to sell short when 
the market trends make a downturn. As a trader, your goal is to be positioned in 
the strongest stocks and sectors when you buy, and in the weakest when you sell 
short.

Author Bio:

Some other recently published finance articles

Tenants With Poor Credit Even Enjoys Loan by Turk Malloy
Tenants lack of collateral which raises doubts in their minds about availability of loan. Now tenant loan has come with a great relief to ...

The UK Consumer's Guide to Shopping for Car Insurance Online by Mary Simone
To be truly successful at shopping for car insurance online, the consumer must find the best deal available on the Internet, not merely the first offer for cover that appears on the screen. The good news ...

Are You Throwing Your Money Away? by John Cranley
Dear Readers, My ...

Easy personal loan to finance your desire! by frank howard
Whatever the reason it may be you can seek a personal loan to finance your desires whether you are planning to equip your house with sophisticated ...

Bad credit consumers can still find sources of financial assistance by Martin McAllister
In the last few years, consumer debt in Britain has been spiralling: from credit card debt to large mortgage burdens, it seems that UK spenders have become a nation of borrowers. A recent article ...

Setting up a Merchant Account by John Tillman
Simply explained, a merchant account is the way to accept credit cards as a form of payment for products and/or services ...

Publisher Guidelines

You may reprint this article electronically in your newsletter or on your website, free of charge.

If you reprint this article from our site, then you must keep everything intact. This includes the articles title, author name, articles body, authors bio / resource box, the links contained within the article, all copyright notices and the link pointing back to our site. All links within the article must also be made active / hyperlinks.