News-Based Momentum

Trade after the release, never before for beginners. Pre-news trading is essentially gambling on unknown outcomes. Wait for the announcement, let the initial chaos settle (2-10 minutes), then trade in the confirmed direction. Yes, you miss some of the initial move, but you avoid being wrong-sided on unpredictable outcomes - this is just as true for an overnight FOMC print traded live at 02:00 SGT.

Research consensus expectations: 1) Bloomberg/Reuters polls for central-bank decisions (Fed, BOJ, MAS, PBOC). 2) Analyst estimates for earnings (the three Singapore banks, China and Japan heavyweights). 3) Consensus forecasts for GDP, inflation and NODX. 4) Pre-event commentary from financial media (The Business Times, Bloomberg). 5) Options-market implied expectations (requires more expertise). Building this research habit is essential.

This happens when: 1) The good news was already expected ('priced in') - no new information. 2) It was less good than expected - disappointment despite a positive headline. 3) 'Sell the news' - traders who bought the rumour sell on confirmation. 4) Good headline news masks bad underlying details. Always look beyond headlines to how the news compares to expectations.

Essential sources: 1) MAS website for Singapore monetary policy. 2) SGXNet for corporate announcements. 3) The Business Times and Bloomberg/Reuters for breaking news. 4) For the A50: official China statistics (NBS), PBOC and Chinese financial media. 5) For the Nikkei: BOJ and Japanese financial media. 6) A reliable real-time feed for the night session, when US releases land. Have multiple sources to avoid missing critical news.

It varies by news significance: Minor news: 15-30 minutes of impact. Moderate news (monthly data such as NODX or CPI): 1-2 hours of clear direction. Major news (FOMC, BOJ, PBOC policy, a genuine China stimulus package): 2-4 hours of primary move, and it can set a multi-day trend. Breaking crisis news: can create trends lasting days or weeks. Most news-driven momentum exhausts within the trading day, but significant events can reset market direction for longer periods - and on SGX the move often begins in the night session.

Unlike single-session markets, SGX index futures trade through the night (T+1 session), so overnight US/global news is absorbed LIVE - there is usually no separate 'gap' to trade on the futures. Approach: 1) Decide in advance whether you will trade the night session. 2) When the release lands (e.g., US CPI ~20:30 SGT, FOMC ~02:00-03:00 SGT), wait 10-15 minutes for volatility to settle. 3) Enter on confirmation as you would intraday. 4) Manage normally with automated stops. For STI cash stocks (which trade only 09:00-17:00 SGT), the futures' overnight level signals the next cash open - that is where the 'gap' shows up.

Ride when: 1) The news is significant with a clear implication. 2) The move is confirmed by volume and momentum. 3) Multiple timeframes/assets align (e.g., USD/CNH and CSI 300 confirm an A50 move). 4) The news is a genuine regime shift, not just sentiment. Fade when: 1) The news looks like an overreaction. 2) The initial spike shows immediate reversal candles. 3) Volume declines on the spike. 4) The news is minor or misinterpreted. 5) It was largely priced in. Default to riding; fading is higher risk.

For SiMSCI/STI: 1) Track the heavyweights' dates - the three banks (DBS, OCBC, UOB) dominate the index, plus Singtel and the large caps. 2) Assess how a bank's result moves the whole index given its weight. 3) Trade the index futures on the cumulative reaction. For A50 and Nikkei: 1) Watch the respective mega-cap calendars. 2) Wait for the gap to settle at the next session open. 3) Use partial sizing (higher volatility). 4) Trail stops aggressively - earnings momentum can reverse quickly. Consider options for defined risk.

The annual Singapore Budget (February) and associated property cooling measures (ABSD, loan-to-value limits) create sector-specific moves in property developers, REITs and banks, with a generally milder broad-market impact than India's Union Budget because Singapore's economy is more globally driven and fiscally stable. Approach: 1) Identify key expectations (property, GST/levy changes, sector support). 2) Avoid a heavy position before the speech. 3) Let the first reactions settle - sector rotation can be rapid. 4) Trade SiMSCI/STI or affected names on the confirmed theme. 5) Expect some reversals as initial reactions overshoot.

If the position is not moving after 30-60 minutes: 1) Re-assess the interpretation - did the market read it differently? 2) Check whether liquidity/volume dried up (common in the night session). 3) If flat (not losing), you can hold but tighten a mental time stop. 4) If losing but not stopped, consider exiting and reassessing. 5) If slightly profitable but momentum is dead, take a small profit. Do not hold indefinitely hoping the news 'kicks in' - momentum trades should show results relatively quickly.

Framework: 1) Data collection - historical events with timestamps, content and market reactions, kept separately per contract (A50, Nikkei, SiMSCI react to different event sets). 2) Feature engineering - sentiment scores (NLP, with care for Chinese/Japanese policy language), surprise factors, event type, time of day (and session), market conditions. 3) Target variable - price change over the next 5/15/60 minutes. 4) Model selection - classification (direction) or regression (magnitude). 5) Training - walk-forward validation to prevent look-ahead bias. 6) Live testing - paper trade signals for 2-3 months. 7) Integration - combine model output with real-time price-action confirmation. Expect roughly 55-65% directional accuracy.

It depends on the IV level (SGX lists options on A50, Nikkei and SiMSCI). High IV (rich) pre-event: straddles are expensive - consider waiting for the post-event IV crush to sell premium, or use spreads to reduce vega. Normal IV: a long straddle/strangle if expecting a large move with uncertain direction; calendar spreads if expecting an IV crush without a big move. Post-event: if direction is clear, buy directional options for leverage; if IV is high and you expect normalisation, sell premium. Key insight: the IV regime should drive the strategy choice, not just the directional view.

Build a real-time dashboard: 1) SGS 10-year yields and US 10-year Treasuries - rate sensitivity. 2) Currencies - USD/SGD, USD/CNH (for the A50), USD/JPY (for the Nikkei), DXY. 3) Commodities - crude, gold, and iron ore (a China growth proxy). 4) Equity proxies - CSI 300 for the A50, TOPIX for the Nikkei, S&P 500 futures and VIX for global risk. On a release, observe which asset class reacts first and strongest and use it as a leading indicator. Enter the equity-index position only when multiple asset classes confirm; if they diverge, be sceptical of sustainability.

Tail-risk management: 1) Position sizing - max 1% risk per event, max 2% total news exposure, and treat correlated A50/Nikkei/SiMSCI positions as one event on a shared global catalyst. 2) Hard stops - always in place, non-negotiable, and automated for the night session. 3) Portfolio hedging - consider OTM puts during event-heavy periods. 4) Correlation limits - do not stack positions exposed to the same news. 5) Circuit breaker - automatic pause after a 3% daily loss. 6) Liquidity awareness - reduce size when spreads widen. 7) Black-swan acceptance - extreme events can exceed any stop; size accordingly. News creates fat tails - plan for them.

Optimisation framework: 1) Track every trade: contract, event type, timing (and session), entry/exit, P&L, market conditions. 2) Analyse by category: which contracts and news types are profitable? Which timing windows work? 3) A/B test variations: wait times, stop distances, position sizes. 4) Walk-forward optimisation: periodically re-analyse and adjust. 5) Edge monitoring: track rolling win rate and expectancy - declining metrics signal possible edge decay. 6) Behavioural analysis: identify whether your interpretations systematically differ from the market and adjust or avoid those news types. Review systematically each quarter; optimise annually.