Optimal news pricing

Discussion in 'Technical Analysis' started by stock_trad3r, Jun 11, 2007.

  1. Lets assume there is a piece of econ data measured by importance on a scale of 0 to 1 where 1 is the most important. It is due on T1. The current time is t0.


    The higher the dow rises before the data is released the greater the odds the data will be interpreted as negative and the dow will selloff.

    On the other hand, should the dow selloff before the data is released it, the odds are it will be interpreted as positive and the dow will rally.

    The street forecasts the data will be .5 meaning 'on target'. 0 means off target (unfavorable). 1 means very favorable

    The favorability is normally distributed which means the odds are very low of getting either a 0 or 1.


    Assuming the current time is t0 what is the optimal way for the dow to trade in anticipation of this econ data?