Bugger The News
Hey all,
Well a different tone to today's post, having a gripe at the fickleness of the market when it comes to economic news, views and speeches. In case you are a new reader, I trade primarily from a technical viewpoint, as to be honest I just haven't got the interest in the economic news, and the in's and out's of what moves rates. I can think of much better thing's to do than to listen to speaches from the ECB's Trichet, or the FED's Greenspan or whoever else takes his place, I'd much prefer to be out playing sport, playing with my son or eating a good meat pie. Lately though, I have monitored the news more often, sometimes opening trades because of it, thinking it is the responsible thing to do to get the complete picture, I even wrote a theory article on the subject.
Now I am not here to say that this method is wrong, because I know it is not, many traders are very wealthy trading with a fundamental approach, but I have realised that this method is wrong for me. Looking back over the trades I opened due to the news, apart from overall them making a slight loss (nothing horrible), when I looked back at the charts themselves, the technical signs and indications (no not indicators .. most of which I still maintain are a waste of time) were there in the price action itself. So instead of sitting there hitting the refresh button on my browser eagerly awaiting the economic figures, I should have been watching the price action itself, which in itself would have told me the story just as well. Below is an example of the one time I did do that:
The yellow highlighted area was a live call to go short, purely called from a technical standpoint, based on the triangle formation not being established enough yet, and anticipating a bounce of the daily trend line. I did not of course expect the move to be as strong and fast as it was, that was a bonus, but it was made after sound, logical technical analysis (which of course doesn't always mean it's right). After this trade was complete, I looked at the news sites to see just what made the move so strong, the reason? the ECB talking about interest rates, and the fact that they don't see rates rising again in the new year.
Just last night, the ECB once again opened it's mouth to talk drivel about what it will and won't do, the state of the US economic conditions and it's trade deficit (like they have a real clue), and once again the prices moved accordingly. Can you sense some frustration? maybe just a little ... and it is not coming from the hip pocket as I had no trades open, but for day traders I could see why things like this could drive you nuts.
The last straw for me though when deciding if I would trade the news, has been the going's on of the last two weeks. If you do not know (or do not wish to know, like me) the inner workings of the economic and political systems that drive a currency, this week would have caught you out if you took announcements at face value, for example:
So that's it ;) ... no more fundamental analysis from me, my brain just aint cut out for it, i'll stick to what IS happening on the charts, instead of what MIGHT happen when news is released. Ok .. that feels better .. nothing like a bit of venting. Anyone who is still interested in the fundamentals, I recommend having a read of http://www.dismally.com/ , even I enjoy reading it ;)
On a different note, the weekend conference chat idea is gaining some interest, with details received already for some people from all parts of the globe, so if you are still interested, get your details to me as soon as you can.
Happy trading!
Well a different tone to today's post, having a gripe at the fickleness of the market when it comes to economic news, views and speeches. In case you are a new reader, I trade primarily from a technical viewpoint, as to be honest I just haven't got the interest in the economic news, and the in's and out's of what moves rates. I can think of much better thing's to do than to listen to speaches from the ECB's Trichet, or the FED's Greenspan or whoever else takes his place, I'd much prefer to be out playing sport, playing with my son or eating a good meat pie. Lately though, I have monitored the news more often, sometimes opening trades because of it, thinking it is the responsible thing to do to get the complete picture, I even wrote a theory article on the subject.
Now I am not here to say that this method is wrong, because I know it is not, many traders are very wealthy trading with a fundamental approach, but I have realised that this method is wrong for me. Looking back over the trades I opened due to the news, apart from overall them making a slight loss (nothing horrible), when I looked back at the charts themselves, the technical signs and indications (no not indicators .. most of which I still maintain are a waste of time) were there in the price action itself. So instead of sitting there hitting the refresh button on my browser eagerly awaiting the economic figures, I should have been watching the price action itself, which in itself would have told me the story just as well. Below is an example of the one time I did do that:
The yellow highlighted area was a live call to go short, purely called from a technical standpoint, based on the triangle formation not being established enough yet, and anticipating a bounce of the daily trend line. I did not of course expect the move to be as strong and fast as it was, that was a bonus, but it was made after sound, logical technical analysis (which of course doesn't always mean it's right). After this trade was complete, I looked at the news sites to see just what made the move so strong, the reason? the ECB talking about interest rates, and the fact that they don't see rates rising again in the new year.
Just last night, the ECB once again opened it's mouth to talk drivel about what it will and won't do, the state of the US economic conditions and it's trade deficit (like they have a real clue), and once again the prices moved accordingly. Can you sense some frustration? maybe just a little ... and it is not coming from the hip pocket as I had no trades open, but for day traders I could see why things like this could drive you nuts.
The last straw for me though when deciding if I would trade the news, has been the going's on of the last two weeks. If you do not know (or do not wish to know, like me) the inner workings of the economic and political systems that drive a currency, this week would have caught you out if you took announcements at face value, for example:
- The ECB raise interest rates, the EUR plummets when it is announced.
- Constant flow of strong US data get's released, the USD drops
- The New Zealand interest rates rise by 0.25%, the NZD drops 200 pips in a flash even before the announcement was made.
So that's it ;) ... no more fundamental analysis from me, my brain just aint cut out for it, i'll stick to what IS happening on the charts, instead of what MIGHT happen when news is released. Ok .. that feels better .. nothing like a bit of venting. Anyone who is still interested in the fundamentals, I recommend having a read of http://www.dismally.com/ , even I enjoy reading it ;)
On a different note, the weekend conference chat idea is gaining some interest, with details received already for some people from all parts of the globe, so if you are still interested, get your details to me as soon as you can.
Happy trading!
This entry was posted
on Friday, December 09, 2005 at 11:11:00 AM.
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Posted byFriday, December 09, 2005 7:54:00 PM
I don't trade for news. I always read economic news to avoid any big suprise(it's very important actually if u can get latest news quickly). For me,fundamental is good for big picture while technical is important for short term trade. That's why most experienced forex traders are technical driven unless u trade stock :D
Phildunn
Posted by
Friday, December 09, 2005 11:15:00 PM
A very good point you make phil, keeping an eye on the news simply to know when to close trades, or tighten stops (avoiding those suprises as you say) is a logical thing to do. Nice one :)
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