How is market Rumors circulated?
The broadcast of unconfirmed market news through a variety of means such as word of mouth, media and so on can have a major collision on the share market.
The market can also be very fast to react to such stock Rumors.
What impact do Rumors have on the market?
Rumors mongers transmit such market or investment information devoid of disturbing about the reality of the piece of information.
In such cases, the Rumors have the latent to drive up the prices of the stocks. On the other hand, there may be a case where the repeal can also happen, wherein the Rumors can also send the prices of the stocks plunging.
There are many occurrences where investment news has had an impact on the stock prices, so much so that many companies have gone bankrupt.
What is the stance about Buy on Rumor and sell on news?
News and Rumors can have either a optimistic influence or negative influence on the stock price.
And as such, this news is likely and the prospects are priced in accordingly. If and when these prospects are established with the actual news, the stock price may drop for the time being.
In stock trading, many traders buy on a Rumor, which indicates that they treat the forecasts of technical analysts as if the event has already taken place as they forecasted.
When it is done, the price bar of the stock is built up just like the predicted news is supposed to do.
Sell on news indicates the selling of the stocks once the actual investment news is out. It is highly impractical for a product or a company to live up to the anticipation set by Rumors. Hence, on the announcement of the news, the stocks are sold off.
In some cases, the Rumors that are being spread around could also be the broadcasting of confidential non-public information.
Such an act is called insider trading, wherein the trader with the ownership of such non-public information tries to buy or sell stocks in order to make a profit or avoid a loss.
In online trading, Rumors often pay off for short term traders and are a risky business when it comes to assess and reviewing the forecasts and buying or selling once the news is exposed.