Short answer:You will be late
A shocking revelation from the WSJ:
When the Institute for Supply Management releases its index of manufacturing activity next week, the headlines from the report will flash to traders at what their eyes tell them is 10:00 am. But unless they are subscribers to a new low-latency feed provided by Thomson Reuters, they’ll actually be getting it late—and depending on how they’re positioned, it could be too late.
In July, the ISM signed a contract with Thomson Reuters to offer a streamlined version, called “low-latency,” of its closely watched business-activity report. It will release the full report to Business Wire, a press release service, at exactly the same time.
Investors with the superfast computers and algorithmic-trading software needed to read and act upon the low-latency line’s digitalized information will inevitably be the first to trade on the news. The advantage these high-tech traders enjoy is measured in just millionths of a second, but it will be more than enough time to beat competitors who instead must rely on news services that generate headlines from the Business Wire release
One reply on “Why you shouldn’t trade the news”
If this becomes understood by more and more people, then nobody will trade the news…thereby making news releases pointless for trading. In which case it will become pointless for the “early-birds” to trade on the news also, since obviously insiders have already traded on the actual happenings before it becomes news. Finally, if the “early-birds” also understand this and stop trading on the “news”, it will become pointless for the “insiders” to trade ahead on the news, since the news releases won’t be followed by mass herd action giving them instantaneous profits.
Since all this is not going to happen, it stands to reason that a large section of people will still trade on the news and keep losing their socks (if not their shirts and underwear) in the market.