Rumors happen all the time in the market. While rumors are generally looked down upon, savvy traders find themselves searching for rumors as they have the potential to lead to massive movements in the market, creating potentially profitable opportunities.
In fact, nearly every day, I find yet another profitable opportunity that’s built around a market rumor. Often times, gains can be as high as 10% or more in a single day. So, how does it work,what are the risks and how do you go about finding rumor-related opportunities? Here’s what you need to know:
Trading With The Rumors Explained
As mentioned above, rumors happen just about every day in the market. In fact, it’s one of the most common forms of stock market manipulation today. Essentially, someone starts a rumor.
These rumors can range from investigations into publicly traded companies to coming product releases, takeovers, and much, much more. From there, they spread the rumor, causing the value of the security to either rise or fall based on the falsified news.
This is where the opportunity is created. Savvy traders know what to look for in order to find these rumors as they break or just after they break. As a result, when the rumor breaks, the trader makes an educated decision with regard to either buy or short the stock, following the run in the direction where the stock is likely headed as a result of the rumor.
When the value of the stock reaches the peak or valley associated with the rumor, the savvy trader exits their position, making a profit.
Tip: avoid the rumors by buying Motley Fool stock picks.
What Are The Risks Associated With Trading Rumors
Any time you make a move in the market, you’re doing something that comes with inherent risks. At the end of the day, these moves are essentially predictions of what’s going to happen in the future. Since psychics only exist in fairy tales and movies, this is something that you’re not going to be able to be 100% accurate doing. As such, there is always going to be a risk of loss.
However, when trading with rumors, the risk is a bit higher. At the end of the day, market rumors are just like any other rumors. They are generally invalid, and even if there’s some basis of truth, the overall rumor will likely prove to be a blatant lie. As a result, rumor-related moves in the market tend to be highly volatile, increasing your risk of loss if you’re not willing to exit your position quickly when the time is right.
So, this isn’t the type of trading that everyone should be doing. Make sure that you have a strong understanding of technical indicators and a strong enough will to exit at the right time without your emotions getting in the way before you get started.
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Great Places To Find Market Rumors
OK, so you’ve heard enough, and you want to get started. So, where do you find the market rumors? Well, in my experience, there are two sources that tend to be great! Those sources include:
- Twitter: Twitter is by far the best source for finding market rumors that I’ve found to date. All you need to do is go to Twitter and take advantage of their search box. Simply search something like “Takeover Chatter” or “Takeover Rumor”. Watch the feed closely to see the rumors as the break, giving you the optimal opportunity to take advantage of the move.
- StockTwits: StockTwits is another great source for finding market related rumors. In order to do so, simply go to StockTwits and search using the search function as you would with Twitter.
In my experience, there is no need to use any other services. I’ve found plenty of rumors using both Twitter and StockTwits, making a good chunk of change in the market in the process.
At the end of the day, there are several factors that will cause movement in the market. However, few factors cause as substantial of moves in such a short amount of time as rumors do. So, by finding these rumors early and capitalizing off of the movement they cause, large profits can be generated!
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