News Is Noise
In this post:
- How to read a trading chart?
- What does technical analysis allow us to understand?
- What do I think about trading on the news?
Normally it would be redundant to say to technically minded traders that “news is noise” … but these are not normal times.
Let’s talk about what a chart represents. A chart is a visual representation of the collective decisions and subsequent psychology of millions of market participants. The language that we collectively speak at Simpler is technical analysis, which allows us to understand the physics of price action. Because we’ve already established charts and price action represents the millions of market participants, the language to best understand the market is a technical analysis of price psychology. They use an overused term, the “news is baked in”, meaning price moves before the news is news. We are all technical traders and I recognize that I am preaching to the choir. My goal with this post is not a technical one, as we understand that trading and news don’t mix. My goal with this post is a personal appeal to the human behind the trader reading this, as a reminder to be cautious with your headspace and what you allow in.
The signal is price, news is noise.
The allure is understandable, but there is always the next news cycle to fill.
Maybe restating it as “news creates noise” is more accurate. At the end of the day, we are all granted the same 24 hours to find the signal in markets and as humans. News in markets, or in our daily lives, only creates noise. You win that game by not playing that game.
Want to hear more from Sam? Get his High-Level Market Overview Delivered to Your Inbox Every Sunday.