Serious equity traders will usually keep a very close eye on the businesses linked to the stock which they are trading. It’s always worth keeping in mind that a stock doesn’t always react in the way that one might necessarily expect. Let’s say that a company has just endured a tough quarter, and has reported a significant drop in underlying sales. The natural assumption would be that the stock price of the company in question would therefore fall – after all, the company has clearly had some issue affecting it over the past three months.
However, if at the same time as the company announced the figures for the previous quarter they also announced that they were planning on embarking on a substantial share buy-back, there’s a significant chance that the stock price would soar, despite the bad quarter. Traders who were only aware of the first piece of publicly available news and not the second could potentially lose money because the stock price might well have gone in the opposite direction to what they were expecting.