• Periodic news or recurring news – Periodic news occurs at regular intervals. For instance, interest rate, repo and reverse repo rate announcements by the Reserve Bank of India. Similarly, economic data like inflation data releases and quarterly earnings reports from companies are other examples of recurring news.

• Unexpected news or one-time news – Unexpected news includes events specific news. News such as sudden terrorist attacks or some geopolitical tension. Other abrupt events like any market developments on the economic or financial front like the threat of debt default by an indebted European nation etc. One-time news, in general, is adverse than favorable.

1. Always know the dates and times of important events in advance

Information on the dates and times of key market events is crucial. Events such as RBI announcements, economic data releases and earnings reports from key companies. Such pieces of information are readily available online. As a day trader, you should always know such a “calendar of events” in advance.

2. Do always have a strategy in place beforehand

To be successful in trading on the news you must plot your trading strategy in advance. This will save you from not to be forced into performing any rash decisions arising due to the heat of the moment. Knowing the exact entry and exit points before the action begins due to the arrival of news on the floor is very important.

3. Evade gut reaction in response to news

To be a successful day news trader you need to make a habit of stopping taking a position on your gut reaction on a news. You must always make rational decisions to trade. Never ever exceed your risk tolerance level. Also, as a long term investor, you may require to be a contrarian on occasion, while trading on news. As a successful long-term investor, this is the best approach for successful equity investing.

4. Cap your risk levels with every trade

At any cost avoid the temptation of trying to make fast money by taking a concentrated long or short position. What if the trade goes against you? So always put a calculated stop loss according to your risk appetite while trading on news.

5. Do not panic, trust in your open positions

Presuming you’ve done your homework, before opening a day trade position here is a small suggestion. Do never consider adding to an existing position if the stock plunges towards your stop loss in a buy position and vice-versa. Also, do not revise your stop loss in the case when your trade goes wrong. If the day prices of the stock go high volatile due to the news, then better exit the position and let the volatility calm down before you reenter. In case, the trade goes in your favor then only revise the stop loss in place of booking small profit.

6. Don’t get influence by the market sentiment, trust your analysis

Never enter into any position without proper analysis, even if time is very short. At the same time once you take your position, don't look for market sentiment to adjust your position. Being under the high influence by market sentiment may result in too many instances of buying high, in a scenario when in actual the prices are prepared to plunge and selling at lower levels when prices are preparing to move up. Do always keep read in between the chart patterns and technical indicators that you might be following.

7. Know when the news effect fades

Some times the effect of the news on the stock prices lasts very short and some times quite long. It all depends on your analytical skills and technical understanding of the underlying stock chart to grab the right opportunity at the right time. Many times you will need to ignore to take a trade as the effect of the news on the stock fades quickly.

Prof. Damodaran suggestion for mastering news analysis for day trading 

1. Find a reliable source of information  

It goes without saying that good information is the key to success with any information-based trading strategy. 

2. Have a clearly defined strategy for trading on the news information  

Since you will have to trade quickly, you will not have much time to analyze when news comes out. You will need to make a pre-judgment on when you will be trading. 

3. Maintain discipline 

Don’t deviate from your trading strategy and stick to the time horizon that you have chosen for yourself. Holding on to a stock for a few days more is not a good strategy. Especially in a hope to recoup your losses can make a bad situation worse. 

4. Always be willing to control your trading costs 

Since you will be trading frequently and immediate execution is key, your trading costs can be large. As the funds at your disposal increases, the price impact you have as you trade can be substantial.