Buy The Rumor, Sell The News Strategy Explained

Forex trading strategies are mostly based on various technical analysis methods. Basically, you don’t even need to understand the context: just look for strong signals, confirm them, and open positions. It definitely works pretty well, but that’s not the only way to trade currency pairs: like any assets, they’re dependent on what the market thinks about them, and that opinion is affected by news and rumors. In this article, we explain how to anticipate important news and use them to open profitable positions.

About the strategy

The strategy extends far beyond the Forex market, but it’s especially popular here. However, very few traders actually get it right: buying rumors doesn’t mean you base your decisions on mere rumors. On the contrary, you should anticipate important news before they actually reach the market. That means you buy the same asset everyone’s going to buy in a couple of days, but you buy it among the first on the market while the price is still low.

Once the announcement you’ve been waiting for is out, everyone wants to buy the asset, pushing the price up. But for you, it’s actually time to sell the asset — that’s what selling news means. Of course, it works the other way around, too: if you think an important event is coming that may influence the price of a certain asset by pushing it way down, you can go short and then buy the news. Anyway, what you should do is predict important events before the market reacts to them, and that’s the essence of this entire buy the rumor, sell the news strategy.

How to use it for trading

While the essence of the strategy may sound quite simple, executing it on the real market can be a bit trickier. First of all, you need to look for rumors, and there are several ways you can find them. Monitor low-latency news platforms to get news without any delays. This way, you can react to them quickly to open positions before other traders do. You can also resort to fundamental analysis of the Forex pair you’re interested in to determine its general trend.

Once you’re sure about some upcoming scenario, it’s time to weigh the associated risks versus all the possible rewards. However trustworthy your calculations may be, don’t forget that this strategy falls in the category of speculation, so it’s inherently risky. Now, it’s time to enter the market. Be ready to exit when the majority of traders get the news.

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