Trading on the News
'Trading on the news' is a technique used by traders to justify buying or selling securities. News reports often spur short-term moves in the market, creating trading opportunities.
Announcements about earnings, product launches, changes in management, all are events that can cause a company's stock price to move up or down.
Digital news sources
Today, news travels through digital means. It reaches social networks at breakneck speed. News can spread virally from the originator to millions of people in a matter of minutes. If the news has material value, it is re-tweeted immediately.
News sentiment analysis
Computers programs can now sift through 1000s of news elements in seconds, figure out the subject, how many people are talking about it and if the news is positive or negative.
With this technology, gone are the days of staring at a Bloomberg terminal for the purpose of identifying trading opportunities. Computers essentially have mastered how to 'trade on the news'. This technology is virtually eliminating the need to pay someone to watch over your portfolio.
Sentiment based Wall Street
As of 2009, Wikipedia states that computers who are using events to trigger trades, accounted for 60% of all US stock market trading volume.' In 2016, this phenomenon has ballooned to 75% of all equity trades.
Wall Street's automated strategies have become so pervasive that we can say that the market is about to become fully robotized.
The spread of robo-advisors to 'trade on the news' is coming to age and the financial sector is about to experience a large market disruption.
This disruption is already happening at a fast clip. Fintech startups such as Stock Circles are already providing this technology to TradeKing users and big firms like Charles Schwab and E*Trade already market their version of robo-advisory tools to their customers.
Automated 'trading on the news' brings about a new world of opportunities, where investors will get a better 'bang for their buck' without the need for a traditional Investment Advisor. All they will really need is a brokerage account and access to their favorite auto-trading tool.