The Authority’ on Price What news releases affect the forex market Trading. In 2016, Nial won the Million Dollar Trader Competition. I believe very strongly that the price action of a market reflects everything we need to know about it. I personally don’t trade the news or use fundamental analysis in my trading, and I honestly feel it is a big part of why I’ve been successful in trading.
Are you a technical or fundamental trader? It is my hope, after reading this article and some of my other lessons on news trading and fundamentals, that you will give a long hard think into what really makes sense to you and what doesn’t. I firmly believe that traders need to choose between technical analysis and fundamental analysis. I also do not believe in combining them. Trading, perhaps more than any other profession in the world, is an extremely easy thing to over-complicate. It is my belief, that by cutting out all news and fundamental analysis you can quickly and permanently eliminate half of the clutter from your mind that’s causing you to over-think and over-complicate trading.
At Learn To Trade The Market, we subscribe to the belief that price action is the best way to define the market, analyze it and find trade setups. Therefore, we believe that the underlying price current and price dynamics are what determine what a market will do next, not for example, the Russians moving troops into the Ukraine as we saw recently. Financial media outlets want you to believe otherwise, that’s why the mainstream consensus is that there’s always a fundamental reason behind price movement. There’s an entire industry that depends on making you believe economic news reports and world news is what moves the markets and is what you should pay attention to. You see, the key reason why the news simply doesn’t matter and why I will never trade based on it, is because what really matters is what market participants THINK about how the news will affect the market. People trade their views on a market, which are often contradictory to the news and what it implies.
It’s important to note that the examples below of Oil and Gold took place over about the last two months. In both cases, the price action was clearly leading the news because we had obvious uptrends in both markets. One good example is the recent geopolitical unrest in the Ukraine, with Russia threatening military force there to take the Crimea peninsula. Typically, commodities like Oil and Gold will rally during threats of war, especially in countries rich with natural resources like Russia. They were forecast at 185k but came in at just 113k, well below expectations. In the chart below, we can see that Crude Oil has been in a strong uptrend since about the middle of January. A lot of news has come out during the course of this uptrend, both good and bad, but all that mattered to a price action trader like me, was that the market was clearly in a strong bullish trend.
Another excellent example of why the news doesn’t matter has been the Gold market. We can clearly see in the chart below that since December 31st 2013, gold has been surging higher and in a very firm bullish trend. 2 months, you’ll no doubt find many who were bearish on Gold and economic reports that implied Gold should go lower. When you’re in an open position looking at news, it will influence you in some way, whether you think it will or not, it will. Looking at news while you’re in an open position can make you change your mind about the trade, even if the price action and the technical picture have not changed at all. It’s a ridiculous thing to assume that because you read something contradictory to the trade you’re in, the market will somehow turn against you.
You need to remember that you need to stick to your trading method and your trading plan, because if you don’t, you’ll never know if your method works because you won’t give it a chance to play out. Intervening in trades because of some news report is almost always a bad idea, and in the odd chance it works out in your favor, you’re just reinforcing bad trading habits. The next big mistake that looking at the news can cause you to make is that it can convince you to stay in a bad trade. In summary, if you just remove the news entirely, it will eliminate the potential of making either of these mistakes. Some of you reading this will have experienced a lot of the things in this article, but you may still not be convinced even after reading my views and your own experience. You have to decide how you’re gonna live your life as a trader.
It’s my hope that today I’ve helped you decide that you now need to go forward and decide to well and truly change the way you think. I can guarantee you that by following just price, you’re going to totally clear your head space and remove a lot of the mental confusion and clutter out of your trading. It won’t be easy, but next time you walk into a room and see financial TV on or see financial magazines, hold back, don’t get sucked into the unnecessary world of news and fundamental analysis. What’s Your New Year Trading Resolution? Thanks for this, I was so confused until I see this. You’re not only a great trader. Thank you for clarifying why its not good to trade The news.
Of course your Artie was all that i needed to see the picture. Now I understand why the big boys move the market and we respond to their moves and not the actual news itself. You answered my email with rapid speed. Keep up the good work man.
I agree with nial fuller ,on this issue ,their is just to much media hype in trading the markets. The economist take a world view of whats going on in the here and now, and they compile all of this media hype and try to make common sense of world marketing events. They are usually wrong in their analysis of world marketing events. So i agree with the above article. Nial, your honesty is a rarity.