Why Trading Off News Stories Will Guarantee You Will Lose
Many novice traders like to pay attention to the huge amount of online news stories and try and trade off the information contained, however, this is a huge mistake and one that is guaranteed to make you lose. If you don’t believe the above, consider this fact: The ratio of winners and losers today, is the same as it was 50 years ago. This is despite the advances in news and distribution and all the other tools that traders have available to them – the ratio has remained the same.
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Why? Because they don’t help you win! Think about it – if traders made money listening and acting on news stories, then they would all be rich and this is not the case. Sure, the stories and arguments sound convincing, but that’s all they are, opinions and stories and the people giving these stories and opinions are not traders. The market is a discounting mechanism and quickly reflects all news instantly – it’s discounted and the market is looking to the future.
Trade the news and You're Trading The Past.
Also, if you listen to the news you will let your emotions get involved and trade with the herd and this is a bad place to be – most lose! Keep in mind that the market news is most bullish at market tops, remember 1987 and the tech stock bubble? Well, when they crashed the news was out and out bullish.
The best way to trade is to ignore the news and use a technical approach to trading. By doing this, you will see the reality of price as it is and act on it - this will keep your emotions out of your forex trading. Will Rogers once said: “I only believe what I read in the papers”. He was joking of course, but most traders base their forex trading signals on what they have seen in the news and then wonder why they lose.
There is a huge amount of news online, on TV and in the papers, telling you what has happened and for this it's very good. However for telling you what is going to happen, it is of no use at all. So if you want to win in online forex trading don’t pay attention to the news!
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