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04 Dec 2015

The economy and related themes happen to be a major message woven into news & media reporting during the entire past year. By having an average of over 40 million viewers each day, television news features a broad reach. With such a critical message and such a huge audience, it should be no surprise that the media comes with a impact on investors choices from the buying and selling stocks each day. This article exposes many of the little-known facts regarding the change up the media has on investor decisions along with what they can do about it.
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Following are six types of ways in which news & media influence currency markets investing.

1. Specific Referrals: Specific references from news & media sources into a company or stock symbol have considerable effect on investment activity connected with that stock. Furthermore, the solution is quick. Within a few minutes, a stock price will start to rise, if the media reference is positive, or it may begin to fall, when the media reference is negative.

2. Negative Impacts: Often, a unique referral within the news & media can impact stocks from other companies inside same sector or industry group as the referenced stock. Unfortunately, occasionally the referral leads to inappropriate consequences.For instance, a negative news mention of Stock #1 drives down the price of Stock #1. Stock #2 is within the same industry group as Stock #1 as well as the price of Stock #2 drops at the same time. It is highly likely that investors holding either Stock #1 in addition to investors holding Stock #2 will both quickly sell their stock to capture any accrued gains or to limit their loss.Unfortunately, the negative news reference for Stock #1 will not be relevant to Stock #2. If it is the case, there is no legitimate reason behind the price of Stock #2 to lower. Investors with knowledge of the company associated with Stock #2, often see this as an opportunity to quickly buy additional shares of Stock #2 to benefit from the lower price.Generally, industry will quickly wake up for the unintentional negative impact and also the price of Stock #2 will begin to rise back to its previous level. Knowledgeable investors are content since they bought at a cheaper price. Those existing investors that sold Stock #2 are unhappy because they reacted to a falling stock price and now recognize that Stock #2 must not have dropped in price in these situations.
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3. Overriding News: As pointed out earlier, stock prices respond quickly to news specific to a company. However, news reported later in the same day or week, may override the earlier company specific news. Your initial news may have caused a regular price to begin to elevate, only to see a alteration of the direction with the price when the latter news report premiered. In most cases, investors cannot anticipate this situation and its consequences are unfortunate, but real.

4. Who is able to I Believe?: News & media sources often make extensive using "guest experts" that are generally well-informed about some part of the economy or stock exchange. This is a positive aspect in their newscasts. However, playing these experts implies that even the experts seldom come in 100% agreement on the issue accessible. Most investors are looking for answers and may be aggravated while the lack of definitive solutions to their questions. Even if this may be a turn-off to some investors, it makes a positive contribution for the industry as a whole as it does provide investors with an increase of pieces to the puzzle with respect to a better understanding of the "big picture".

5. Usually do not Run With The Bulls: News & Media reporting can create a response that demonstrates "herd mentality". This kind of reaction is generally not depending on sound investment principles but on the opinion of a group or person who can start the bulls running.After a while investors tend to gain confidence in stock recommendations offered by a television financial personality or editor of a financial newsletter. If this "leader of the bulls" makes a buy recommendation on the specific stock, generally after the market close of this trading day, the herd quickly responds by placing a buy order to the stock. When the market opens the next day, this large number of buy orders could cause the stock price to quickly surge or gap up and a lot of of those buy orders get filled at prices considerably more than the previous days closing price. When other investors see that stock price rising, they need to get in on the action plus they place orders further driving in the price of the stock. Often, this inflated stock price is temporary and the cost of the stock returns to appropriate levels leaving a number of the herd in a loss position.Our advice is "do not run with all the bulls". Wait to see exactly what the price does over the coming week and then make a decision based on your individual fundamental and technical analysis of that stock.

6. Watch Out For Old News: Many stock trading game traders fail to recognize the effect of institutional investors. Wikipedia defines institutional investors as "organizations that pool quite a bit of money and invest those sums in companies. Their role in the economy is to act as highly specialized investors for others." Examples of institutional investors are banks, insurance providers, brokerages, pension funds, mutual funds, investment banking, and hedge funds.Institutional investors hold the benefit of internal professional staff specializing in studying the pros and cons of a company in order to determine whether that institution should purchase that company stock. The media is not aware of the project of these professionals, nor it activity of the institution, until afterwards once the price might have been driven up. At that time, the media may unknowingly report the "old news" with the price rise. This report could cause the public to begin to buy that stock further driving up the price. This can bring about artificially high prices that can eventually drop back down after the old news is no longer being reported.Await technical indicators offering indication of institutional activity. Make the best decision. Do not react to old news.

Conclusion:

* Stock exchange investing is an adventure that should not be undertaken by an untrained person. However, with training, investment research, along with a big picture view of the economy, it is possible to benefit from some wise investments.

* Appreciate news & media sources for who they are; everyday people reporting as best they can on a very complex global economy that is certainly quickly changing and transitioning to a broad range of political and financial factors. Recognize that writers and reporters are not and cannot be experts in every things, so do not accept all news as gospel. Instead, produce a bigger picture view determined by multiple media sources a duration of time. Factor that information into your training and experience to make wise investment decisions


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