| If you are a stock trader or investor, then you | | | | hype, or over react to many breaking stories. |
| surely have seen market over reactions in the past. | | | | Because of the media's overreaction, investors |
| A story breaks, and before you even get to read | | | | usually get over excited and either buy or sell stocks |
| the first word of the article the stocks related to | | | | related to the given news story for prices well above |
| that story have already taken huge jumps up or | | | | or below it's eventual target price. |
| down. I have been trading stocks for quite a while | | | | #2 Panic |
| now, and have seen trends for sure. I thought I'd | | | | As traders see a breaking news story which will |
| explain why I believe markets, particularly the stock | | | | affect a stock, they panic, and instead of taking |
| market over over reacts to both good and bad | | | | even just a few minutes to read the entire article, or |
| news almost instantly. Be warned that this is not | | | | listen to the entire news broadcast, they hit the buy |
| something I trade on, as I'm more of a long term | | | | or sell button depending on the story's baring on the |
| investor/trader, nor should you read too deeply into | | | | stock. Sellers, if negative, or buyers if positive flood |
| my reasons. 2 Reason the Market often over shoots | | | | the market, pushing a stock in one direction before |
| it's target on news: | | | | the public becomes aware of all the details and more |
| #1 The Media Often Overreacts | | | | rational minds bring the stock back from the extreme |
| As with any news story, if the media thinks it can | | | | it just hit. |
| gain your viewership by reporting on a one sided | | | | As a trader you have to sometimes sit out and be |
| basis, they usually will. The media is known for their | | | | patient until you, yourself have all the information |
| exaggerations sometimes, and its part of every | | | | necessary to make an educated rational decision. |
| reporters thinking. The bigger the news story, the | | | | Ignorant decisions based on quick glimpses of over |
| more people who tune in, so, even if a media outlet | | | | hyped media will surely lose you money in the long |
| claims to be fair and balanced, they are likely to over | | | | run. |