All the events and news that happen around the world can have a great impact on the stock market. Very often, if a war breaks out or political problems arise the stock market will take a plunge. The saying of "buy on the sound of cannons, sell on the sound of trumpets" suggests that the start of, or the continuance of, a war is a good time to invest in the stock market, while the end of a war is a good time to sell. The saying was coined in 1810, and is attributed to London financier Nathan Rothschild.

The idea behind this phrase is that during times of war there is a considerable amount of uncertainty and panic in the markets, which leads to selling. This selling pushes down the value of stocks leading to lower valuations and making it an attractive time to buy even if there is a war ("buy on the sound of cannons"). In contrast, when the war ends and uncertainty and the risks of war are removed from the market, people start to buy. This increase in buying causes stock prices to rise again - leading those just-purchased-at-low-prices stocks to higher valuations, making this an attractive time to sell ("sell on the sound of trumpets").

The term also is used in a similar manner to the phrase, "buy on bad news, and sell on good news." This constant theme in the financial market simply suggests that the market often overacts to both good news and bad news, which provides investment opportunities if you are watching carefully.

For further reading, see When Fear And Greed Take Overand Taking A Chance On Behavioral Finance.

  1. What was Nathan Rothschild's interest in funding the Napoleonic Wars?

    By funding the Napoleonic Wars, Nathan Rothschild and the Rothschild family were able to manipulate forces and institutions ... Read Full Answer >>
  2. How do mutual funds split?

    Mutual funds split in the same way that individual stocks split, but less often. Like a stock split, mutual fund splits do ... Read Full Answer >>
  3. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>
  4. Is it better practice to use a stop order or a limit order?

    Both stop orders and limit orders have their advantages and disadvantages; traders need to decide between the two based on ... Read Full Answer >>
  5. What is the difference between a buy limit and a sell stop order?

    A buy limit order is a specific type of buy order used to enter a market, while a sell-stop order is a sell order that can ... Read Full Answer >>
  6. What is the difference between a short squeeze and a long squeeze?

    A short squeeze and a long squeeze are situations that can force traders and investors out of their positions. A short squeeze ... Read Full Answer >>
Related Articles
  1. Investing

    How the Rothschild Family Created Their Wealth

    An overview of how the Rothschild dynasty became one of the most powerful families in the world.
  2. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  3. Savings

    3 Steps for Retirement Saving and Investing Habits

    We take a look at the choices we make today that our future selves would prefer not to be making, often faced by investors when saving for the future.
  4. Active Trading Fundamentals

    Why Rational Ignorance About Your Investments Might Really Be OK

    It's impossible to know everything about the markets. Find out how ignorance affects your investments.
  5. Trading Strategies

    The Traits All Baller Traders Have In Common

    When it comes to traders, these are the traits that separate the wheat from the chaff.
  6. Active Trading

    Bad Luck With Trades? 5 Things You Might Be Doing Wrong

    If you're in a trading rut, ask yourself these five questions to help turn the corner.
  7. Active Trading Fundamentals

    Why Contrarian Investing Is Not Very Smart

    Like most allegedly sure-fire methods in the investment industry, this one has its flaws too.
  8. Active Trading Fundamentals

    Playing It Safe With Trades? Or Holding Yourself Back?

    Fear of breaking out of a comfort zone can prevent an investor from reaching his or her full potential.
  9. Investing Basics

    Why Blue Chip Stocks Are Key to Buy-and Hold Investing

    Several blue chip stocks have proven that buy-and-hold investing still works, even after the huge declines of the Great Recession.
  10. Active Trading Fundamentals

    How Successful Forex Traders Manage Profits

    How to balance anticipated vs. confirmed trades to manage potential profits and lower risks.
  1. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
  2. Crowded Short

    A trade on the short side with an overwhelmingly large number ...
  3. Outcome Bias

    A decision based on the outcome of previous events without regard ...
  4. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  5. Centipede Game

    An extensive-form game in game theory in which two players alternately ...
  6. Cournot Competition

    An economic model that describes an industry structure in which ...

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center