Buy the Rumor, Sell the News: Mastering Market Trends

What Does "Buy the Rumor, Sell the News" Mean?

The adage "buy the rumor, sell the news" is a well-known strategy in the trading world. It suggests that buying a stock or asset when rumors or speculation about positive news drive up its price can be profitable.

Buy the Rumor

The "buy the rumor" phase refers to the period leading up to the release of a favorable announcement. Rumors and leaks can spread optimism, leading to a surge in demand and price.

Sell the News

Once the actual news is announced, the "sell the news" phase begins. The release of the news often triggers profit-taking by short-term traders who have already benefited from the pre-announcement increase. As a result, the stock's price may drop after the announcement.

Why Buy the Rumor, Sell the News?

This strategy is used by traders who believe that the price of an asset will rise more in anticipation of good news than after the news is officially released. By buying before the announcement and selling shortly after, they aim to capture the price movement driven by speculation.