What does priced inmean in trading?
What does priced in mean? It means the market already expects something and has adjusted prices for it. When the news finally arrives, only the part that was not expected can move the price.
This is why a currency can fall on "good" news: it was good, but not as good as everyone had already bet on.
Expectation versus outcome
Before every big release, traders position for what they think will happen. The forecast in the Economic Calendar shows the consensus. If inflation comes in at 3.1% and the market expected 3.4%, the number is lower than expected, even if 3.1% sounds high.
How to use it
Always compare the actual number to the forecast, not to your own opinion. And watch the reaction in Realtime Headlines: when the market moves against what the news "should" do, you just learned what was priced in.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
A central bank hikes as expected and the currency falls. The hike was priced in, and some traders take profit.
A central bank holds when the market expected a cut. The currency jumps because the move was not priced in.
Mistakes to avoid
- Judging news as good or bad without the forecast.
- Buying after the news that everyone already expected.
- Ignoring the reaction when it disagrees with your view.
What makes it different
The Scenario Desk shows what is priced in before a release and what happens in each outcome.
Questions
How do I know what is priced in?
Start with the forecast in the calendar and the rate probabilities for central bank meetings.
Can something be partly priced in?
Yes. Markets often price a probability, for example a 70% chance of a cut.
Why does the market sometimes ignore big news?
Because it was expected. Only the surprise moves price.