What is Announcement Effect?
Announcement effect or signal effect, as the name suggests, is the impact an announcement makes on the market. In general, it is the reaction of traders and investors to any change in policy by a government or financial agency/firm, which will come into effect at some future date. Announcement effect can be positive or negative, and it can vary depending on the importance of the announcement or how the market interprets the announcement.
Announcement effect is prominent in intraday trading, where the market is moved by news and reports. Traders always try to profit from the reports and policy changes released by agencies on topics like growth reports, future economic expectations, inflation, interest rate changes, financial policy changes, figures released, stock splits, undertakings and merging, etc. As often the announcement dates are fixed early, traders can plan to profit from virtually almost all outcomes of an announcement effect.
With announcement effect market timing is critical. As often the effect stays only for a short period, traders should react quickly to exploit it. This also requires good trading knowledge and market understanding. A positive announcement needn't create a positive response in the market; the market often has expectations and the effect can vary depending on how much the expectations are satisfied. Announcement effect is a big market moving factor and is evident in very high volatility and trading volume around certain announcement dates.
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Announcement effect is prominent in intraday trading, where the market is moved by news and reports. Traders always try to profit from the reports and policy changes released by agencies on topics like growth reports, future economic expectations, inflation, interest rate changes, financial policy changes, figures released, stock splits, undertakings and merging, etc. As often the announcement dates are fixed early, traders can plan to profit from virtually almost all outcomes of an announcement effect.
With announcement effect market timing is critical. As often the effect stays only for a short period, traders should react quickly to exploit it. This also requires good trading knowledge and market understanding. A positive announcement needn't create a positive response in the market; the market often has expectations and the effect can vary depending on how much the expectations are satisfied. Announcement effect is a big market moving factor and is evident in very high volatility and trading volume around certain announcement dates.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
10:09 AM
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