Understanding Stock Rumors and How You Can Use Them to Your Benefit

Even as a Forex trader, there’s a lot to learn from the great Ripple failure of 2017-2018.

All the crypto-maniacs were hopping on the bandwagon, buying hundreds of thousands of Ripple (XRP) for insanely low prices, around 10-20 cents.

It had all to do with the information circulating the practicality and efficiency of Ripple. The news said XRP was in, Bitcoin was out.

And they were right.

Kind of. On January 18, 2018, XRP was worth $3.47.

The rumor had sufficed and the good news broke out. Since then, it’s just been continuously falling.

Ripple was dead.

What does this tell us about stock rumors?

You might’ve heard the phrase “buy the rumor, sell the news”.

Read on to learn why this bit of wisdom has been passed down by the Forex gurus.

Stock Rumors vs. Stock News

Trading Forex, we’re constantly perusing the headlines to stay on top of paradigm shifts or fads.

But unlike other investors, our focus is on changes in interest rates. Such changes are powerful tidal waves that ripple outward and affect the global market.

Common Sense

When we anticipate a particular change, we have to assess the nature of it.

For example, the U.S. government might release a statement which promises a massive growth in employment. However, from 2005-2006, not all of those promises were fulfilled, since Hurricane Katrina devastated Louisiana.

These kinds of events obviously predict a decrease in the value of the USD, which would also affect a wide variety of other commodities.

Other events, however, are more ambiguous.

Understanding how these kinds of changes affect things requires not much more than common sense.

Keep in mind, though: common sense is a learned trait.

A one-year-old doesn’t have common sense because they haven’t yet had the experiences which promote its development. By trial and error, we get a feel for things.

The same applies to Forex trading. Understanding the ups and downs of the news requires experience and dedication.

Buy the Rumor, Sell the News

With the advances of both artificial and human intelligence, there’s never been greater pressure for foresight in Forex.

As soon as rumors come out, the stock wizards are placing their bets.

Once the news about the stock comes out, everybody wants a piece of it. This leads to overvaluing, which leads to a decrease in value.

The most basic technique to buying the rumor is to straddle trade.

This involves looking at the currency’s value 20 minutes prior to the event and place pending orders on the high and low points of that range.

Now you’re prepared for any direction the market may go. It’s clear that this practice is advantageous where the market is extremely volatile.

Riding the Wave

You can’t ride the wave if you didn’t paddle with it.

There’s no free lunch in surfing. Either you start with the wave, or you’re out of it.

Same thing goes for trading.

Stock rumors are amazing gateways of opportunity, but you have to get in on it early.

Is the anxiety of trading getting to you? We’ve made the mistakes for you. The easiest way to make money with Forex is to put your faith in the most reliable signals.

This article was written by our in-house forex traders with a combined 20+ years of experience in trading the financial markets.