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How is discounting, and why is it normal to fall for good news?
Published by The Retail Trader · AUG 08, 2026 · Advisory & Research
Stocks fall on good news and people get confused. The answer lies in a simple behavior of the market – sentiment is not a reaction to the news, it is a reaction to the expectation and news.
By the time any news comes, a large part of it is already in hi price - because logs take hi position first on the expectation of it.
Therefore the real reaction is whether the actual result was better than expected or worse. Even a good result can decline if the expectations were higher than that.
These things are derived from this behavior:
• Taking a position before the event is a different risk — you are playing against expectations.
• Volatility increases on the day of results, hence the option premium also becomes more expensive.
• The position taken after reading the headline often seems to be the worst.
• The reaction of two stocks on a news may be opposite, because of positioning.
If you are seeing something on the news app, it is already on every trading desk. The edge is not on our information – the edge is on how you interpret our information, and how much you can wait.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.