How to make profitable trading with politicians’ statements

The ‘trading of the news’ has always been an interesting technique followed by many traders in their daily business. News, on the other hand, is the basis for any market activity. With the advent of social networks there has been a proliferation of information available to everyone. Even the political world has equipped to promptly issue statements about events or opinions that can immediately reach a huge audience of recipients. Among these are investors.
Evidently, not all the statements of all politicians count to make profitable trading. There are some leaders, however, who are able to act as true market movers with their declarations. Or to represent a phenomenon so well that, whenever they talk, traders react with predetermined strategies, earning money.
The most striking case in recent months is that of Boris Johnson, the frontrunner of the Tories, a well-known brexiteer of the first hour, who, with his anti-European and pro-Brexit positions, has generated a real “Boris Johnson effect” on the pound. The sterling has recently hit a 27-month low against the dollar, also falling against the euro. One of the reasons for this sharp decline is the increase in forex trader’s expectations of a UK exit from the European Union without agreement (no deal), with its supposed disruptive effects on the British economy. Boris Johnson has always declared that London will exit the block ‘whatever it costs’. His strong position was enough to generate a belief among traders, which was then merged into a real ‘rule of thumb’, according to which they go short of sterling whenever Johnson makes statements on Brexit. A simple and effective strategy. An agreement born of the spontaneous market belief, regardless of whether it is right or not. On the other hand, beliefs often count more than reality in financial markets.
Another striking example is represented by the American president Donald Trump and his famous tweets. Artfully designed, almost always published early in the morning, as if it were a ritual, Trump’s invectives against China, the European Union, the excessive price of oil, Russia, etc. have become proverbial. Even among traders. So much so that many traders in the City of London or in Wall Street eagerly await Trump’s early morning tweets to take their market decisions. The oil sell-off following Trump’s fierce words on excessive oil price will remain in the annals of trading. Donald Trump is currently one of the main market movers, from whose lips many traders hang every day. The important thing to do is to be there, behind a screen, at the time of the tweet, possibly avoid making any movement immediately before the expected declaration and sell or buy as soon as possible the asset class targeted by Trump. It is simple. But has also been very rewarding for many traders so far.