For this reason news trading was popular for some years. It worked in this fashion:
Just before a news release, the trader would enter a hedge order. One order to buy just above the market's prerelease price range and the other order to sell just below the market's prerelease price range. Whichever way the market went after the release, the trader would catch much of the move while simultaneously canceling the other order.
Market makers especially did not like this trading method.
Brokers began taking countermeasures -- ballooning spreads significantly before, during, and after a news release or simply slowing the data feed. Clever news traders took countermeasures. The brokers took counter-countermeasures. The game was afoot, as Sherlock Holmes would say.
Now comes the CFTC and NFA. "No hedging allowed." While there is still a small cadre of news traders, the Rule 2-43 prohibition against hedging and very sophisticated broker measures have spelled the quietus for this trading technique.
Tip: News traders today may use a cross-platform hedge. A buy stop is entered on one platform and account simultaneously with a sell stop on a separate platform and account.
By Michael Duane Archer