Learn how to buy the rumor and sell the news. Find out the secrets behind this market maxim
Are you curious what the maxim “Buy the rumor and sell the news” tells you? Watch our latest video to find out what is the meaning of rumor and its importance in trading.
Buy the rumor, sell the news – Everything you need to know
Hi there! Welcome to this video, which is, How to Buy the Rumor and Sell the Fact or how to sell the rumor and buy the fact. Now, this is a very common market maxim, and the reason it’s a common market maxim is because it happens over and over again. And the principle behind this is, when there’s an anticipation of something, whether it’s a bearish or bullish anticipation, the market is buying or selling into the anticipation. This is best explained through an example, so let me give you one.
Here, we have the Australian dollar/Japanese yen pair. Now, the market has been in a steady kind of downtrend and this downtrend has been fueled by the US-China trade war and particularly with Trump saying that he’s gonna be starting or introducing tariffs on the Chinese exports into the US. And so the market was just waiting, waiting, when is he going to announce the tariffs, when is it going to come into play, the market was selling off, selling off. And then, this is the time when Trump announced the implication of the tariffs would be in place on the 24th of September and all of a sudden price has rallied. So, the markets have been selling the rumor and now they’re buying the fact and the reason it works is because the anticipation is gone. You know, people have been selling on anticipation of the trade tariffs. So, once the trade tariffs come into play, unless they’re more than the market was expecting, currently there’s no one left to keep selling, really, and so the positions are reversed, a lot of the sells closed because the fact has happened and price reverses. So that’s the sell the rumor and buy the fact.
Here’s another small one for you, a nice simple trade and one that I took advantage of last night. What’s going on here is, Wednesday, 19th of September, you have New Zealand GDP coming out, 0.8% expected versus 0.5% previous. That’s a good scenario, the Bank of New Zealand governor, Orr said that we’re gonna be lower rates for longer and he cited business confidence a very low. Now if the GDP is high and doing well, then it doesn’t matter how people are feeling, the reality is that the economy’s doing well. So this is anticipation, expectations of a good read, okay, 0.3% of the increase of the previous read. So I knew that into Wednesday, into that event, the New Zealand dollar was most likely to be bid and, okay, there’s a weak US dollar picture as well, but across the New Zealand dollar pairs, if you look around this time, the 19th of September, you’ll see that the New Zealand’s always bid and I just opened up along.
Here, last night, I just took a longer return onto that moving average, put my stop below and I took profit this morning up into these highs here. And look, I should have held it, could have, would have, should have, but that’s a good example of buying the rumor. So, I’m buying the rumor of the good GDP and you might expect, if that is coming out as 0.8%, then you might expect selling the facts, but you’ve got a factor into weak US dollar at the moment.
Okay, guys and girls, that’s a brief introduction to Buying the Rumor and Selling the Fact.
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