The continual ups and downs of stock prices can be attributed to supply and demand swings. A stock’s price will rise if there is an increase in demand to buy it. A stock’s price will go down if there are more sellers than buyers interested in buying it.

As such, it doesn’t take much for the latest news to have a major impact on the equilibrium between supply and demand.

Yet, news-chasing is not a sound stock-picking approach for the average investor. Most of the time, skilled traders will respond to news before it is officially reported. Here, we will take a closer look at the impact of news events on the stock market and show you how to stay ahead of the game.

The effects of news on stock prices

When bad news comes out, investors usually start selling their investments. Many, if not most, stock prices will fall in response to selling pressure caused by a disappointing earnings report, a lapse in corporate governance, broad economic and political instability, or other unlucky events.

When people hear good news, they tend to buy stocks. Stock prices rise in response to news that businesses are doing well, releasing new products, making acquisitions, or seeing positive economic indications.

How to act before the news breaks

Most of a trader’s day is spent looking ahead to the next news cycle in the hopes of trading stock before the official data are revealed. In order to accomplish this, they consult a wide variety of resources:

Economic releases

The health of the economy and the consumer can be gauged by looking at the most recent employment data from the Bureau of Labor Statistics.

The U.S. Census Bureau’s data on orders for long-lasting goods provides insight into retailers’ expectations for future spending. These are among the many official reports that serve as both lagging and leading indicators. Durable goods orders are a leading signal, which is more highly valued.

Industry news releases

A quarterly report is a rehash of previous information. How orders are shaping up, which products are trending, and which ones are dying off are all important questions for traders to answer right now.

News alerts

You can set news alerts to receive updates as they are released or on a daily journal schedule. If, for instance, you’re interested in learning more about how the global drought is affecting food prices, you can create an alert for the phrase “drought food prices” and be notified whenever an item is published that contains those keywords.

You can choose to just receive alerts for specific content categories, such as “pictures,” “videos,” “news,” and so on.

RSS Readers

Rich Site Summary (RSS), often known as Really Simple Syndication, is another way to tailor the online news you receive.

To easily identify sites that offer RSS feeds, look for the orange and white icon. If you have an RSS reader installed on your computer, you can copy the link to the feed that the site gives when you click on the icon.

The most useful aspect of RSS is that it enables you to view all of your recently updated news feeds, blog entries, and other relevant online material in one convenient location.