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Stock Market News & Media - The way the Media Impacts Investments

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The economy and related themes are already a major message woven into news & media reporting throughout the past year. By having an average of over 40 million viewers every single day, television news has a broad reach. By using these a critical message etc a huge audience, it needs to be no surprise that the media posseses an impact on investors choices from the buying and selling stocks each day. This article exposes some of the little-known facts regarding the impact the media has on investor decisions and just what they can do over 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 with a company or stock symbol have considerable impact on investment activity linked to that stock. Furthermore, the response is quick. Within a matter of minutes, a stock price will start to rise, if the media reference is positive, or it might begin to fall, if your media reference is negative.

2. Negative Impacts: Often, a unique referral within the news & media can impact stocks from other companies inside the same sector or industry group as the referenced stock. Unfortunately, there are occassions when the referral ends in inappropriate consequences.As an example, a negative news mention of the Stock #1 drives on the price of Stock #1. Stock #2 is in the same industry group as Stock #1 as well as the price of Stock #2 drops also. It is highly likely that investors holding either Stock #1 as well as investors holding Stock #2 will both quickly sell their stock to capture any accrued gains or 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 decrease. Investors with understanding of the company associated with Stock #2, often see this as an opportunity to quickly buy additional shares of Stock #2 to take advantage of the lower price.Generally, the marketplace will quickly wake up to the unintentional negative impact and the price of Stock #2 will begin to rise back to its previous level. Knowledgeable investors are content since they bought at a lower price. Those existing investors that sold Stock #2 are unhappy simply because they reacted to a falling stock price and after this recognize that Stock #2 should 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 some company. However, news reported later within the same day or week, can frequently override the earlier company specific news. The first news may have caused a stock price to begin to go up, only to see a change in the direction in the price when the latter news report premiered. In most cases, investors cannot anticipate this example and its consequences are unfortunate, but real.

4. Who is able to I Believe?: News & media sources often make extensive use of "guest experts" that are generally well-informed about some aspect of the economy or currency markets. This is a positive take into account their newscasts. However, paying attention to these experts shows that even the experts seldom are in 100% agreement on the issue taking place. Most investors are seeking answers and may be aggravated by the lack of definitive strategies to their questions. Even though this may be a turn-off to some investors, it can make a positive contribution to the industry as a whole because it does provide investors with more pieces to the puzzle with respect to a better understanding of the "big picture".

5. Tend not to Run With The Bulls: News & Media reporting can create a response that demonstrates "herd mentality". This type of reaction is generally not based on sound investment principles but about the opinion of a group or person who can start the bulls running.Over time investors tend to gain confidence in store recommendations offered by a television financial personality or even the editor of a financial newsletter. Once this "leader of the bulls" makes a buy recommendation over a specific stock, generally following the market close of this trading day, the herd quickly responds by putting a buy order to the stock. When the market opens in the morning, this large number of buy orders might cause the stock price to quickly surge or gap up and several of those buy orders get filled at prices considerably higher than the previous days closing price. When other investors see that stock price rising, they want to get in on the action and they place orders further driving inside the price of the stock. Often, this inflated stock price is temporary and the expense of the stock returns to appropriate levels leaving a number of the herd in a loss position.The best advice is "do not run together with the bulls". Wait to see exactly what the price does in the coming week and then suggest a decision based on your own fundamental and technical analysis of that stock.

6. Look out for Old News: Many stock market traders fail to recognize the outcome of institutional investors. Wikipedia defines institutional investors as "organizations that pool quite a bit of money and invest those sums in companies. Their role for the overall design is to act as highly specialized investors for others." Examples of institutional investors are banks, insurance firms, brokerages, pension funds, mutual funds, investment banking, and hedge funds.Institutional investors contain the benefit of internal professional staff focusing on studying the pros and cons of the company in order to see whether that institution should purchase that company stock. The media is not aware of the task of these professionals, nor a purchase activity of the institution, until after the fact once the price could have been driven up. Then, the media may unknowingly report the "old news" in the price rise. This report could cause the public to begin to buy that stock further driving the price. This can cause artificially high prices that can eventually drop back down after the old news has stopped being being reported.Await technical indicators that offer indication of institutional activity. Make a knowledgeable decision. Do not reply to old news.


* Stock market investing is an adventure that should not be undertaken by an untrained person. However, with training, investment research, and a big picture view of the economy, you'll be able to benefit from some wise investments.

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


Posted Dec 04, 2015 at 7:24am