Don’t Get Cooked By ‘Hot’ Trading News

2020-07-20

Today’s market environment is anything but boring.

Add in the barrage of “hot” news sweeping across the airwaves and internet every hour of every day and confusion among traders can get out of control.

One thing to remember is there is never any “certainty” in the market. There is always a level of uncertainty that can trip up the most savvy trader.

Traders are wise to understand that “news creates noise.” Shaping a trading plan around the screeching of financial pundits or dire economic alerts is a recipe for failure.

At Simpler Trading, we lean on technical analysis as a means to avoid the noise and navigate the markets with a plan and purpose. The plan is to understand the physics of price action and use this understanding to make money.

As a whole, we aren’t concerned about who’s right or wrong in the news. No talking head on any investment news program or “informed” article will ever pay our rent or mortgage.

Sure, we all have to take into account news about an impending hurricane or flash flood, and especially a pandemic. Or a CEO stealing a billion dollars from a highly-valued company.

But news creates noise that can take away from our focus in trading.

Our number one goal is to make money.

As we lean into technical analysis — no matter what the market is doing — this helps us track the psychology of what’s happening in the market.

When you think of technical analysis, realize that it considers charts and price action — these represent the millions of market participants (investors and traders). This fuels the “psychology” of the market.

Ever wonder why the news — especially “breaking” news — often appears a step behind the market?

The “news is baked in” is a common term in trading. This means price moves before significant events become news.

Trading in line with the news in our experience has proven to be a bad combination. The allure to follow the news is understandable considering the latest updates are available on any topic 24/7. But keep in mind there is always the next news cycle to fill, so those updates tend to be slanted toward news filler than news value.

Be cautious and guard what you allow into your head space when it comes to information.

Technical analysis shows that price signals the execution of a trade.

The noise of “hot” news is not necessary within a sound trading plan.

We Saw: tech-fueled Nasdaq jump start the week — 

  • Dow, S&P 500 start down, turn positive
  • Nasdaq looking to hold onto positive uptick
  • TSLA up another 9%, no pause in sight?

We’re Watching: staying alert with feisty Monday and more earnings ahead —

  • Political hints of more stimulus money, market response
  • NFLX settling down with slight uptick on close
  • Setups in: AMZN, OSTK, TSLA, LULU, ROKU, 

Does it make sense to “see” price moves before they happen? Learn about catching “pops and drops” in a volatile market.