Like many other technical traders I feel that news events have little impact on price movements if any. Even big releases like the NFP or FOMC announcements don’t appear to have any lasting effect regardless of how much a number may be more or less than the market expected.
But so many people hang on these announcements like they are valid trading signals. Blindly trading news events is about as close to gambling as it gets. I personally see the monthly NFP report as a gambling opportunity more than anything else.
For me having an awareness of high impact news releases is only necessary to see if there could be any short term volatility that could risk a technical trade I idea I’m sizing up. Sometimes I’ll even time an entry or exit based on where the market might get pushed to after an announcement. That’s as close to trading the news as I get
News is Reactive – Something Else Drives the Market
The more I learn about Socionomics, Elliot Waves, Fractals and Fibonacci numbers in nature the clearer it becomes (to me) that however sophisticated the human race is we are still animals and we still move in herds. These cycles of boom, bust are just a natural process playing out…
…and the news announcements and fundamentals react to try and maintain balance and control.
What Does This Mean for You?
So as a trader looking to make it into the coveted top 5% who actually make it – what does this mean for you?
- Are you having problems which could be due to a method that relies on news announcements?
- Do your trades get stopped out because of high impact reports that cause temporary volatility?
- Do you often find yourself on the wrong side of the market even though the direction doesn’t make sense and it should be going the other way?
Get With the Trend
Many of the most successful traders have learnt to identify and trade with the trend. Can you do this?
Here’s a weekly chart of the US Dollar Index. The wedge formation starts prior to the 2008 financial meltdown. Does that chart pattern look like a financial meltdown to you? (click image for full size)
The preceding big down move definitely looks like a bubble…
So what’s next for USD and other markets?
I’ll be watching my charts and not the news (unless it poses a threat to any of my open positions)…