One reason that the stock and securities markets are so volatile is that they respond to news events. Prices reflect information, changing when any little bit of information comes into the market — even if the info is just that someone wants to buy and someone wants to sell right now.
The problem is that sometimes the market participants don’t react in proportion to the news they receive. Good traders have an almost innate ability to discern news that creates a buy from news that creates a sell. Sometimes traders want to go with the market, and sometimes they want to go against it.
If you are a long term investor (versus a day trader), your investments are also affected by news announcements. When this happens, you need to consider how your position — and you — will react.
After all, no matter how long your time horizon and how careful your research, things happen to companies: CEOs have heart attacks, major products are found to be defective, financial statements turn out to be fraudulent, and so on. How are you going to respond?
Read Article: http://www.dummies.com/personal-finance/investing/day-trading/good-day-traders-react-to-breaking-news/