Beating the Gun

An expression used to describe an investor buying or selling a security at a beneficial price before the market can react to news.

Due to computerized and electronic trading, beating the gun is thought to be very difficult or near impossible for the average individual investor. Once news reaches the average individual, professionals have most likely acted on the information already. However, when the market is in an extreme mood, it may lag in its reaction to “good news”. For example, the Federal Reserve cuts rates in January 75 bps one week before they were scheduled to meet. Stock index futures were heavily down pre-market and it took a while before the market started reacting to the surprise rate cut and moved up sharply from lows.

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