Day-traders live for big news events. News moves markets. The Federal Reserve announces a rate cut, and the financial markets ignite. Terrorists succeed in delivering a crippling blow to an oil pipeline in
Nigeria
, and fuel prices spike and equity prices drop like a ton of lead. Many types of news events have the ability to make or break a trade, and with little warning.
When it comes to news, traders need to consider two big issues: How to use news to make money and how to protect themselves from the devastating effects of unanticipated news.
Although, you can never plan for everything —especially the unexpected — there are five things that day-traders can do to put themselves in the best position to survive most of what might crawl across the news ticker, and, with practice, maybe even profit from it.
Lesson No. 1: Never trade without a stop-loss order.
There is one way to know your risk before entering any trade: When a trade
is entered
, determine the amount of loss you are able and willing to incur on the trade and place a stop-loss order at that point. That way, if there is a terrorist attack or a sudden sharp rise in oil price or some other unexpected market-moving event, there is some protection in place.