Trading The News Is A Waste Of Time
Published by Jay Davies in Trading articles
Every day in the financial world there are multiple news reports and releases. Many traders get caught up in the belief that by reading and paying attention to all these news items, it will give them some sort of edge on the market, helping them to determine what price will do next.
Unfortunately, paying attention to fundamental analysis can wreak havoc with a traders mind and account! The fact of the matter, is that people move the markets, not the news.
If an upcoming high impact news report is due, than price will frequently make big moves well before the actual release. These moves are often based upon people's emotions, greed and what they think the news will be. Take for example the high impact reports that were due to be released for the Eurozone. At the time there was still 54 minutes until the actual figures for unemployment were announced.
However, notice how price made a massive move in those 54 minutes prior to the actual news announcement and against the trend at that! Yes, come news time price can behave erratically in the market.
When traders base their decisions on emotion and greed, rather than on clear price action signals and the footprint left behind by "the smart money" in the market, than really that's tantamount to gambling and a surefire way to completely blow up a trading account. Price could easily of gone the other way in the above example, that's how uncertain fundamental analysis is and why it's a waste of your time. It's certainly not the way professional traders approach the market. They understand that price on the chart will tell them everything they need to know in order to make informed decisions and high probability trades.
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