
With all the news about Greece’s debt crisis, economic reports, and other news events that affect markets that happen every day, it’s impossible to keep up with all the news. What can a trader do?
My strategy is simple and works very well: I turn off everything. I blocked everything out, which is the best, most freeing, and most relaxed way to trade. It’s better for your trading performance and could be the key to keeping your trading account in good shape.
Trade now, not soon.
Have you noticed that an economic news report can cause a Forex currency pair to move in the opposite direction of what you expected?
There’s a good reason for this. People are what moves the market, and they make trades based on what they think or what they hope will happen. In fact, when news or an economic report comes out that they had been expecting, the price change that comes from it has already happened. This is where the old saying, “Buy to believe the story, sell the truth,” comes from.
It shows how the markets are doing right now and gives us hints about what might happen in the near future. It gives real, measurable evidence. People tend to predict what will happen in the future on the market today, which tells us that if an event occurs soon, it will not affect the market in the way we expect. This is why there is no reason to trade based on how an event might affect markets in the future. This is true even if the event affects the market before it happens, which means that we can see its effect on a market by watching how prices move.
So, we’d rather trade in the market as it is right now than try to guess how some news event might affect markets in the near future. If the future is already here, the news event may have already changed the price, while a brand-new one will be traded on. If you try to trade on future news events as they happen, you’ll be late to the party and always being chased. Follow the price action because it shows everything that is happening in the market.
One thing you might want to know What happens when random things happen in the news, like a sudden rise in interest rates, a natural disaster, etc.? It’s a good question, but we can’t guess how these kinds of events might affect markets in the near future because we don’t know anything about them. All we can do is examine the price changes made on the chart. In the end, trading based on current price action is the best way to go. In these situations, you could just wait for the moment to come and then look at your charts to find price movement signals in the volatile market that will follow.
How can an attachment to news cause you to lose your trading account?
Traders are interested in the news and keep track of economic events by looking at calendars. They get sucked into the “black hole” by looking at economic calendars from their broker or other sources and trying to figure out what might happen. This is a very bad situation to be in and is very bad for your trading.
When you decide that XYZ will happen because of an upcoming piece of news, you put yourself at risk of losing the trading account you’ve opened. When you think you know for sure what the market will do in the near future, your logic and objectivity go out the window.
To be successful in trading, you need to keep in mind that trading is an art of probabilities, not absolutes, and trade in a way that reflects this knowledge. If you trade this way, you’ll naturally manage your risk in a good way and stick to your plan, because you know that every trade is a losing one and that you can’t know “for sure” what will happen in the near future.
If, on the other hand, you trade because you think you can predict what will happen based on news, you won’t be able to keep yourself from increasing the risk to dangerous levels. This is the main reason why you shouldn’t ignore the news if you want to keep your trading account safe. If you don’t get news, there aren’t as many chances for you to think you know everything about how the world will change. It also gets rid of the chance of second-guessing and confusion and makes trading a lot easier.
The more time we spend learning about how prices move, how to manage risks, and the psychology of trading, the closer we will get to having a perfect mental model of trading. The hardest thing for a trader to do is to filter out and ignore all the information they see and hear every day. You should trade based on your own thoughts. Trying to study the news and figure out how it might or might not affect the market is a useless game of Whack-a-Mole that can cause you to blow your trading account.