A major economic event, updates from a company, or a geopolitical event, all stir up the financial markets. For instance, the Russian invasion of Ukraine led the DAX to shed 4%. Germany, the largest European economy, had a major fuel dependency on Russia. Along with the DAX, stocks of major companies and indices of countries with dependency on Russia took a tumble. Similarly, the collapse of Silicon Valley Bank sent the global banking industry into turmoil.
News impacts how traders perceive the financial markets and their potential direction. Traders use past data, fundamental analysis and the current state of major economies to speculate on the direction of market movements. This speculation or trader sentiment governs trading decisions and, hence, the financial markets.
Trader sentiment, in response to the news, triggers volatility in the markets, creating multiple trading opportunities. Often, when economic data is to be released, market sentiment is visible even before the actual announcement.
Brokers must incorporate news updates as part of their regular updates for customers to help traders discover more opportunities. In addition to breaking news, helping traders make sense of the vast amounts of data through a breakdown of the impact of news and market sentiment analysis, can drive informed decisions. This empowers traders to confidently take positions and align their risk management and trading strategies with market conditions.
Some types of news that impact the financial markets are:
An important aspect of news trading is to identify which news to trade and at what time. For instance, between 2017 and 2019, almost 40% of the biggest market moves were triggered by trade policies across the globe, primarily due to the US-China trade war. Before this, trade policies did not have any significant impact on the financial markets. Next, as the pandemic halted economic activity worldwide, the capital markets reacted adversely, a first for a medical emergency. In fact, a study found that the US markets had never reacted as forcefully to any past pandemic as they did to Covid-19. Therefore, it is essential to empower traders with adequate information to understand which news events could move the markets enough to elicit a trading opportunity.
Since interpreting the news can be tricky, especially for inexperienced traders, helping them with actionable insights and a breakdown of the information can boost client retention and engagement for brokers. Providing traders with actionable insights on an economic calendar and analysis of high-impact news events can accelerate activity as traders are able to make sense of the resultant volatility and speculate its direction.
Further, regular updates build traders’ confidence to participate in the financial markets. With advanced data-driven insights, their ability to identify viable trading opportunities improves significantly. This helps build a trading psyche that learns to identify and take advantage of market opportunities through analytics.
Today’s traders want everything – the economic calendar, corporate calendar and analysis, along with decision-making tools. The trader demographic has also transitioned, with a large percentage consisting of the fast-paced tech-savvy generations. These generations want instant gratification. Quick updates, analysis and trading opportunities help them remain active in the financial markets. Trading signals, backed by experienced analysis from an FCA-regulated firm, can help build confidence among such traders.
Another factor to consider is that many traders might be participating in the financial markets as a side job. Therefore, they need 24×7 updates to freely trade according to their schedules. They need quick, bite-sized information. Using visual reports is a great idea to facilitate the easy discovery of signals. Adding direct links to the news to take positions with clear calls to action directly from the charts can translate into higher trade volumes.
It can be challenging for a brokerage to build a technology solution from scratch to facilitate news trading. Developing, managing and maintaining such a solution, with updates from across the world, deep insights and timely analyst reports, is a gigantic task. Doing it all in-house is bound to increase costs and require significant time and manpower. Plus, the efficacy of the solution cannot be known until it goes live and traders experience it.
Acuity is a market-leading provider of news sentiment analysis technology trusted by hundreds of brokerages worldwide. Our tools help traders make the most of every news release with:
Schedule a demo to learn how our cutting-edge analytics tool can transform customer experience and boost retention and activity for your brokerage.