[firewalker]

The problem with news-related trading is that most traders focus on picking trades around these releases because they believe the sudden increase in volatility gives them a better chance of making a quick buck. Unfortunately, they often fail to realize the risk that goes along with it. Too many traders see a sudden burst in price and think "this is it", and they jump in.

The patient trader waits and watches how price reacts, and looks to fade the news. This is not to say that fading the news is a profitable strategy in each occasion. One must look to what price is doing with regard to important technical levels, like support and resistance.

Most of the news has already been factored into the current price of the market. This means that once the news confirms what the market was expecting, the whole anticipation is gone and people take their profits and walk away, thus sending the market lower.

There's one very important observation to be made here. f the market should go lower (very bad news), but it doesn't, it signals important strength. The news in itself doesn't matter, but it's the aggregate position of traders before the news. Experienced traders wait to see what the news tells them before acting.

Often a market will run up minutes or hours before a report, if they are expecting good news. That's why by the time the report is released, price can often fall out of nowhere. This is especially the case when the news confirms what is expected or the numbers are the same as forecasted.

(main sources: Marcel Link, Justin Mamis, John Magee, and my own personal experiences)