Trading the news is a topic that is broadly discussed throughout the trading industry with an array of opinions on the matter. So how do you know who to listen to, who is right and the infamous question should I let the news effect my trade? The fact is you will get a different answer from every individual you come into contact with therefore making this a very subjective matter.
Trading is an art form in many ways and can be approached as such, or it can be methodical and approached systematically. Neither would be considered wrong nor right and the simple question would be are you profitable? In our methodology there is a bit of both art and systematic. There are particular items that are near impossible to make non subjective such as analyzing the trend across multiple time frames. This in itself can be confusing, so adding direction can be detrimental to your analysis.
So on the topic of letting news affect your trading; my "opinion" stems from the famous quote "what is known or knowable is already in the price action". This is something that I firmly believe and has held true time and time again. The simple psychology is extremely logical if seriously analyzed. Let's look at who is causing the large moves in the markets......that's right the institutions. So if they are creating the large moves in the market and they are the only ones with the "inside" information, it would only make sense they would be able to push price in any given direction just enough to get the mass majority of traders to do exactly what they need them to do.
What does this mean? In any given transaction there must be both a buyer and a seller while the one left holding contracts wins (more sellers = price drops / more buyers = price rallies). So if there are not enough willing buyers at a certain price level and the "large money" needs to sell, they would need to make the mass public believe it is a great time to buy so they can sell all of their contracts & have plenty left over!
Today 10/30/13 was an FOMC Statement day which holds an extremely high impact on the financial markets. In the video below you will see how the news or sentiment held no bearing on our trade. Is this the "right" way to trade? Again there is no "right" way to trade but if you are making money then by all means continue trading exactly as you are and consider yourself successful.
Comments