With all the recent news related to the debt crisis in Greece and the virtual cascade of economic reports and other news that affects the market that happens every day, it can seem overwhelming trying to keep up with them. What should a trader do?
My solution is simple and extremely efficient; I ignore all of this. I set it all up and it’s the most free and stress-free way to trade, not to mention it’s much better for your trading results and may even be the key to keeping your trading account going…
Trade now, not the future
Have you ever noticed that a Forex currency pair often moves in the opposite direction of what you thought after a certain economic news report is released?
There is a reason for this because people are the main driver of the markets and people trade the market based on their beliefs or expectations of the future. So much so that as soon as the news or economic report they expected comes out, the price action based on it has already happened. Hence the old adage “Buy the rumor, sell the facts.”
Price action is a reflection of what is happening in the market right now, and it gives us clues about what might happen in the future, real, actionable clues. Knowing that people tend to trade their expectations of future events in the market right now, logic dictates that by the time a future event approaches, it will not affect the market in the way we might think. The point is this; it just doesn’t make sense to try to trade based on a news event. power will affect the market in the future when it will affect the market mostly before it happens (now) and we can see its effect on the market through price action.
Thus, we want to trade the “now” of the market, instead of trying to guess how a particular news event power influence the market in the future. By the time the future arrives, the news event will already have affected the price, and there will be a new one on the horizon that people are trading on. If you try to trade the news as it comes out, you will be late to the party and always chasing your tail. Stick with the price action as it reflects everything that is currently happening in the market.
One caveat you might be wondering about; what about “random” news events such as sudden interest rate hikes or natural disasters, etc.? Good question, but since we obviously don’t have prior knowledge of these events, we can’t think about how they might affect the market in the future, so all we have is the price action they are left on the chart after they have occurred. take place. Again, the price action is “winning” and is best traded “now”. In these scenarios, you can wait for the event to unfold and then look at the charts for price action signals in the subsequent volatility.
How News Addiction Can Kill Your Trading Account
Traders literally become obsessed with news and viewing economic news calendars. They get sucked into a “black hole” when they look at economic news calendars from their broker or anywhere else and try to “calculate” what might happen as a result of it, it’s a terrible place to think and it’s very bad for your trading.
Once you convince yourself that XYZ will “happen” based on certain upcoming news, you will set yourself up to destroy your trading account. All logic and objectivity disappears when you think you know “for sure” what the market is going to do at some point in the future.
The main key to success in trading is to remember that trading is a game of probabilities, not certainties., and trade in accordance with this knowledge. When you trade this way, you naturally manage your risk properly and stick to your trading plan because you remember that any trade can be a loser and that you never know what will “for sure” happen at any point in the future. .
Conversely, when you trade with the belief that you “know” what will happen based on some news event, there is nothing to stop you from raising your risk to an unsafe level. This is the main reason why ignoring the news can save your trading account. Ignoring the news deprives you of many opportunities to convince yourself that you know something “for sure” about the future of the market. It also removes a lot of doubt and confusion and greatly simplifies the trading process.
The more we focus only on price action, risk management and trading psychology, the closer we get to perfect trading thinking. Often the biggest obstacle to a trader’s success is simply tossing out and then ignoring all the information they come across every day. You want to trade with a “clean” mindset, and trying to analyze the news and figure out how it may or may not affect the market is like a useless game of “hit the mole” that will eventually lead you to empty your trading account.
To get started on the path of “pure” trading focused only on price action, risk management and trading psychology, check out my Price Action Trading Mastery Course.