Post-news drift: the slow move after the fireworks

[Fairman]

Post-news drift: the slow move after the fireworks

After the initial chaos, price often settles into a quieter drift. For a while it moves steadily in one direction with small pullbacks, as larger participants digest the information and adjust positions at a more measured pace.

This phase is less glamorous but often more tradeable. Spreads have normalised, fills are cleaner, and direction has had time to emerge. A scalper entering five to fifteen minutes after the release with a clear read on direction faces much better conditions than one entering during the first ten seconds.

The drift does not always occur. Some releases produce a spike and then nothing. Others produce a sustained trend that lasts hours. The type of news and the size of the surprise matter.

A way to study it is recording, for each major release, the direction of the first spike, the direction of the move from minute five to minute thirty, and whether they agree. After a few months, patterns appear for specific events.

It is a quieter way to trade news, but it is also more forgiving of delays.

A look at the data tends to show that the drift is strongest when the surprise was large and clear, and weakest when the report was mixed. Using the size of the surprise as a filter turns a vague idea into a testable rule.

How often does the post-news drift go in the same direction as the first spike?