A Possible Trade After a Deal Is Announced...READ MORE
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A Possible Trade After a Deal Is Announced
It might sound counterintuitive to some traders. But it can often be better to wait for the news than to jump into a trade in anticipation of the news. That's because stock prices often make significant moves when news is announced. It might seem like a trader wants to catch that move.
That is one perspective on trading. But there are other approaches. The idea of getting in to a position before news creates the possibility of being wrong. Often, the stock does move but it is sometimes a move in the opposite of the expected direction.
Waiting until news is released to take a position, as we explain in our latest article, could also be profitable. This is especially true if the trader uses strategies that limit risk. In the article, we discuss a strategy that limits risk, news that created a large price move and then identify a trading opportunity to potentially benefit from the news, after the news is already known.
This trading opportunity uses real market prices rather than a hypothetical example and shows precisely how potential rewards and risks are calculated. With the actual data and an example along with a detailed description of the strategy, you could find trades like this on your own.
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