Some traders believe that all news moves are fakeouts, assuming that any sharp price movement triggered by news is destined to reverse quickly and trap those who react. While it is true that some news-driven spikes are short-lived and cause volatility traps, not every news move is a fakeout. In fact, many major trends begin with powerful news-driven moves that establish real momentum and lasting directional shifts.

The belief that all news moves are fakeouts oversimplifies the complexity of how markets process new information.

Why Traders Assume News Moves Are Always Fakeouts

Several experiences and assumptions create this mindset:

• Past painful experiences: Traders who have been stopped out during wild news swings tend to distrust news-related moves.
• Desire for control: Thinking all news moves are fakeouts gives traders a comforting sense of predictability in unpredictable environments.
• Overreliance on mean reversion: Traders who favour fading moves (betting on reversals) naturally expect news moves to fail.
• Misunderstanding volatility: Confusing short-term volatility with reversal behaviour leads traders to misinterpret genuine breakouts.

However, dismissing all news moves as fakeouts can cause traders to miss powerful opportunities.

When News Moves Are Fakeouts

Sometimes, news does produce fakeouts — but specific conditions usually create this:

• Minor news releases: Lower-impact economic reports may cause knee-jerk reactions that quickly fade.
• Already priced-in news: When traders expect a certain outcome and it occurs, the initial move may reverse rapidly.
• Liquidity gaps: In thinly traded periods, news can cause exaggerated spikes that retrace when normal liquidity returns.
• Ambiguous news: Vague or mixed signals confuse markets, leading to volatile but directionless moves.

In these cases, the market lacks conviction, making fakeouts more likely.

When News Moves Start Real Trends

Other times, news causes genuine, sustained moves:

• Surprise announcements: Unexpected rate cuts, policy changes, or geopolitical events often initiate major trends.
• Major economic data shocks: Inflation, employment, or GDP reports that massively miss forecasts can trigger multi-day or multi-week trends.
• Shifts in fundamentals: News that fundamentally changes the economic or political outlook often marks the beginning of new trend phases.
• Strong follow-through: If the market moves sharply and volume surges in the direction of the news, it often signals real commitment by institutions.

Thus, assuming all news moves are fakeouts can cause traders to miss or bet against strong, lasting trends.

How to Trade News Moves Intelligently

Rather than treating all news moves as fakeouts, successful traders:

• Assess context: Consider whether the news fundamentally changes the market’s outlook or is merely noise.
• Watch volume and momentum: Strong, sustained moves on high volume often indicate real conviction.
• Use confirmation: Wait for retests, consolidations, or secondary breakouts before entering rather than blindly reacting.
• Manage risk carefully: News-driven volatility is high, so protective stops and smart sizing are essential.
• Stay adaptable: Be willing to trade with the news move if the market shows clear follow-through, or fade it cautiously if evidence of a fakeout emerges.

Flexibility and context are key to surviving and thriving around news events.

Examples of Genuine News-Driven Moves

• Brexit vote (2016): GBP/USD plunged and established a long-term downtrend after the unexpected Brexit result.
• COVID-19 pandemic announcement (2020): Global markets collapsed in a real trend, not a fakeout, as economic lockdowns were announced.
• US inflation shocks (2022): Unexpectedly high inflation readings triggered sharp US dollar rallies sustained over months.

Each case proves that news can and does create real, enduring market moves.

Conclusion

It is completely false to believe that all news moves are fakeouts. While some news reactions are short-lived and tricky, others mark the start of major, lasting trends. The key is learning to read context, volume, and follow-through rather than making blanket assumptions. Traders who respect the complexity of news-driven markets and manage risk intelligently can capitalise on some of the biggest opportunities news events offer.

To learn how to trade news events professionally with skill and precision, enrol in our expertly designed Trading Courses today.