We have more and better Forex news, delivered quicker than ever before and many traders like to study the news and trade on it, to make bigger profits – but how actually do you trade the news? The best way to trade it, is NOT the way most traders do and that’s why they lose!
Let’s make one point clear the news itself is NOT important, it’s the traders reaction to it that is; we all the same facts to look at but we all make up our minds individually, about what we see and this mass of opinions makes a price. Furthermore, the opinions of traders are colored by the emotions of greed and fear.
So what does this mean in terms of trading the news?
It means don’t pay attention to the news itself, pay attention to traders reaction to it, think about it:
Every big bull market, collapses when the fundamentals are most bullish and rallies when it’s most bearish, so trading the news itself is of little use. The news simply reflects the opinions of the crowd and always remember – 95% of traders lose!
So what’s the best way to trade news stories?
The best way is to look at how discounted the news already is for example, if a bullish news story fails to push the market higher or a bearish one fails to push it lower, if this occurs a turning point could be coming.
If you could make money trading the news, Forex trading would be easy and while the news sounds clever and hard to argue with, it very often turns out that markets move the other way! Will Rodgers once said ” I only believe what I read in the papers” he was joking but most traders take the news as something that is likely to be right but its just an opinion – nothing more.
So forget trading the news and focus on studying market sentiment, it’s trading psychology that moves prices, not supply and demand facts. So use charts and trade the reality of price change and look at how prices move, in relation to news stories for clues to where there going next.
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