News

News is of secondary interest to the day trader or swing trader; it serves only a general educational purpose in helping you determine the direction of the global trend by fundamental analysis. The value of news is often quite limited, because most of the time you do not possess the one critical piece of information that is only available to a select few – and which will change the picture altogether.

Experienced traders try not to trade at times when major news is expected, because volatility increases dramatically and the market becomes very ‘choppy’. At these times, the probability of your stop getting hit is much greater than usual. I personally have a rule not to trade one hour before and one hour after news, and this rule has saved me on countless occasions.

We are pre-programmed to sustain an illusion of control over our futures.  In reality, major world-changing events come from way outside our sphere of influence… and at times when we least expect them. Wars, economic crises, and technological innovations often stem from initially unimportant or unlikely events. For example: penicillin saves millions of lives every year, yet it was an entirely accidental discovery.  It is important to understand that the news we read simply feeds our illusion of control. Oftentimes it can do the trader more harm than good because – when all is said and done – only God has the complete picture.   

In his book “The Black Swan”, Nassim Taleb describes this concept in great detail and draws some rather unusual conclusions with respect to how the news might be used for financial gain. During the financial crisis of 2007-2008, Taleb made tens of millions of dollars by betting on low-probability events.

The price chart tells you everything you need to know in order to make a trade!

There is only one reason why you should be aware of impending news… so that you are not trading when it comes out!