What Does ‘Buy the Rumor Sell the News’ Mean?
Buy the rumor, sell the news is something that happens in most markets, particularly financial. Sometimes traders trade based on what they believe will happen in a given economic report or event (the rumor). Once the event passes or the report is released (the news), they dump their positions and the market moves.
Traders are motivated in a certain key financial speeches or statements given by reputable bankers, financial think tank or what not in entering the market. Usually if a certain financial data going to release, there will be word around shrouded with positivity to push a certain financial instrument to appreciate.
However, when the real financial data released, and if it’s a negative data, the plunge is imminent and traders whom went long or buying into the financial instrument will have to catch some falling knives…or in a subtle scenario… avoid it.
I have seen some smarty pants bought on rumoured news and made an handsome profit before the actual news or financial datas released. This ‘brady bunch’ have a certain glow in their faces…smile of satisfaction and relief. I became friends eventually.