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Buy the Rumour Sell the News

In cryptocurrency trading and trading in general, investors often buy the rumour and sell the news. This is usually because prices tend to rise as a rumour spreads and then drop when the actual rumoured event takes place.

In the simplest possible terms, a buy the rumour, sell the news occurs when traders buy into an asset, be that a stock, commodity or crypto on the breaking of a rumour and ride a gradual rise in price up to the point where the news actually breaks.

A buy the rumour, sell the news or also known as a buy the hype, sell the news strategy sounds rather counterintuitive but tends to be the case in most instances, especially in financial markets. 

Buy the rumour, sell the news works as follows

Traders hear a rumour about a positive future event and this rumour gets them buying in order to cash in as the price rises prior to the announcement. 

The event happens as expected and then the price starts to drop and by then most smart traders are already out and have taken much of the profit out too. 

Buy the rumour, sell the news makes very little logical sense but turns out to be the case a lot of the time.


A fictitious example of how buy the rumour, sell the news could look

Let’s imagine a fictitious scenario and use a company like Apple and Apple stock as an example to illustrate how buy the rumour, sell the news works.

Imagine that rumours start circulating about a brand new foldable iPhone that people say will be announced in a few month’s time by Apple. 

It will be a game-changer for the iPhone lineup and give Apple a foldable phone to compete with Samsung and its foldable smartphone. 

As the rumours grow, screen renders appear around the internet and on social media, the price of Apple stock rises in anticipation of the official announcement. 

A few months later Apple announces its brand-new foldable iPhone to much fanfare and applause. 

At this point, the price of Apple stock will likely begin to drop. 

Now, this makes no logical sense as the rumour turned out to be true and therefore the price should continue to rise and not fall as there will most likely be a huge amount of sales of the new foldable iPhone. 

This is however how markets tend to react and that is what counts in the end if you are a speculator/trader. 

It is worth noting that typically, this drop in price tends to be temporary.


Timing is everything when it comes to successful trading

Due to this buy the rumour, sell the news phenomenon, clever traders get in when the rumour surfaces or perhaps even before the rumour leaks if they have a hunch or an early indication and then they sell shortly before the news is released, hence buy the rumour, sell the news

If this is predicted and executed precisely the trader can ride the rise, take a profit and get out before the price drops. 

The primary reason why the price rise occurs just after the rumour is that traders are already buying into the future event that has actually not yet taken place and when the event does occur traders have already taken the profit during the rumour period.

Think of it as the profit being delivered before the event and not after. 

If the news happens to be even better than expected traders may often continue to hold for a little longer and squeeze out a little more profit as new buyers can often drive the price even higher.


The reverse can also be true

Rumours of a negative event can sometimes drive prices down and then when the negative event does not come to pass the negative sentiment reverses and the price can begin to rise again. 

A kind of sense of relief price rise when the expected bad event didn’t actually end up happening. 

This reverse negative rumour situation can also allow smart traders to profit.


Some general pointers on how traders can use a buy the rumour, sell the news strategy

These are of course not exact or a complete list but can provide some examples of buy the rumour, sell the news strategies

  • Buy positive events that occur without a rumour – when a positive event occurs unexpectedly it could be good to jump in and ride the price increase
  • Buy on positive rumours – when a positive rumour breaks jump in and ride the price rise up to or just before the point where the news actually breaks
  • Sell on negative rumours – do the exact opposite of the above, sell on negative rumours and buy when the news breaks
  • Buy before any possible negative event is about to occur – and ride the possible price rise
  • Use a stop – for a situation in which an event does not occur in time as it’s possible the price will drop and you can limit any losses
  • Do your homework and be fully prepared for things to go wrong – nobody really knows what will happen with any level of certainty so it’s best to exercise some level of caution when it comes to trading and speculation


A possible example of buy the rumour, sell the news in crypto trading

When Coinbase listed in April 2021 on Nasdaq, Bitcoin prices had been rising significantly before the listing took place and reached a high of almost $65,000.

Following the Coinbase listing, Bitcoin lost almost half of its value in a matter of a few months. This could certainly be explained by a buy the rumour, sell the news situation although it’s impossible to say for sure.



Buy the rumour, sell the news is a very well-worn expression in financial markets and with just cause. 

Very often price rises and drops can be expected to some degree and this is where smart traders are able to jump in and out of assets, be they stocks, commodities or crypto. 

These traders through their timing and knowledge have a feeling about what to buy, when to buy and when to sell based on situations like buy the rumour, sell the market.

Smart traders will often take much of the profit out of the event prior to the event taking place, i.e. they have already been there and taken the bulk of the profit before later comers show up to enjoy what’s left of any profits still sitting on the table!

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leverage trading in crypto

Leverage trading in crypto makes it possible to trade a larger amount of crypto without the need to have the full amount of funds required to execute the trade. It is a risky way of trading and a potentially lethal double-edged sword that can multiply both profits and losses.


What is leverage?

Let’s begin by understanding what leverage is in everyday life. 

A crowbar used to open crates uses leverage to help force the crate open. 

Just using your fingers simply wouldn’t work, the same with a wrench, if you are opening a tight bolt, a wrench makes it much easier or even possible when compared to trying to do it with your bare hands. 

This leverage is the force of your hands multiplied. So, in essence, using leverage you could create a lot more force than with your bare hands alone. 

Leverage trading has been and continues to be used in equity and commodity trading. 

Traders use leverage to allow themselves the opportunity to execute larger trades without the need for the full amount of capital but rather just a fraction of it. 

In high-frequency trading, a trader could be moving in and out of stocks or commodities where even relatively small price changes, when multiplied by way of leverage, could be profitable, or of course deadly too!

So, what is leverage trading in crypto?

Now that we understand what leverage is in everyday terms, we can get a better understanding of how leverage can apply to trading. 

In the simplest terms, leverage trading could allow you to buy and trade more than you actually have the capital available for. 

Let’s say you wanted to buy and trade €10,000 of bitcoin, the important word here is trade, you are not buying the bitcoin as an investment to hold onto, you are buying it for short-term gains with the plan to sell when the price rises. 

In this case, it would be possible to buy €10,000 worth of Bitcoin for maybe a down payment of only €1,000. 

This would be based on a 10x leverage. Now if your €10,000 of bitcoin becomes €10,500 you make a cool €500 on your €1000 (excluding fees). 

A very handsome return! On the other hand, if the price of that same bitcoin drops to €9,500, you lose €500, a 50% loss. A double-edged sword if ever there was one!

How does leveraged trading work in crypto?

Continuing with the above example, let’s say we want to use leveraged trading to buy €10,000 of Bitcoin. 

The leverage is 10x to keep things simple. This means that to execute the trade we would need to deposit a margin of €1000 (1/10th of €10,000). Think of this like you are buying a house for €1,000,000 and the bank asks for a 10% deposit (€100,000) and then lends you the rest. If they need to repossess the house and the price has dropped, the initial 10% deposit can hopefully cover any difference in price and expenses.

In much the same way the exchange asks for a deposit and lends you the rest. 

The goal of course is for the price to rise, you potentially earn 10x what you could normally with €1000. As with all investing and particularly with something as volatile as crypto, things aren’t always plain sailing. So, what happens if things go south?

The deposit you put down is what is known as an initial margin

This “deposit” is known as the initial margin. 

This is what you as the trader would deposit with the exchange in order to be able to execute a leveraged trade. 

The exchange will keep the trade open so long as the initial margin covers any losses. This is how an exchange ensures that they are not financially exposed. 

It is very important to note that you are trading here and potentially all of your initial margin is at risk. 

You are not actually owning any assets. Basically, you are trading, not investing for the long term when you are buying and selling using leverage trading. 

If you get close to the edge of your margin limit, you will get what is known as a margin call.

What is a margin call?

If you’ve ever watched films like Wall Street or the TV show Billions you may have heard them talking about a margin call and looking very stressed, it’s when the brokerage is asking for more money to increase your margin or for you to liquidate some of the equity to make more cash available. 

Now of course, if you add more money, you have more time but could also sink further into a hole. 

Leveraged trading is certainly not recommended for those with a nervous disposition! If things really go south the last resort is something known as a forced liquidation.

What is forced liquidation?

A forced liquidation occurs when the initial margin no longer covers the losses in the trade.

At this moment the exchange forces the liquidation of your account closes out the trade and uses the initial margin, your deposit payment, to cover the losses. 

In most cases, forced liquidations would also incur additional costs. 

It’s really not somewhere you want to be as a trader!

Smart traders watch their positions carefully and will manually close out a trade before a margin call or forced liquidation occurs, thereby not losing their entire margin and moving on to another trade. 

Leverage trading is far away from the cosier world of passive investing!


Leveraged trading is not for the faint of heart or for those with a nervous disposition, however, when used correctly it can allow significantly larger returns on investment (ROI) and not require massive amounts of capital. 

In traditional markets when trading stocks or commodities, the price fluctuations can be considered tame when compared to crypto. 

This means that leverage trading in crypto is a truly wild beast and open positions need to be monitored even more closely. 

Using leverage trading is a pretty risky strategy and could mean big wins or nothing more to show for your trade than a bruised ego and a very dented bank account! 

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