4 Reasons Why I like News-Free Trading?

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For those who are interested to learn how I trade, then do pay attention to today’s article. I can’t claim to be the best trader in the world and I know there are plenty of traders who are better and more profitable than I am. However, despite all of that, I am able to filter out the unnecessary noises in the market and I am able to trade with serenity and calmness, and I am proud of that.

How do I do that? Well, this is what I tell other traders – I trade without paying attention to the details of news.

Unfortunately, I get some distorted funny looking facial expression directed back at me each time I say that. Hence, today’s article is to clarify what I really mean by not paying attention to news and why I like it.

Note: Although I don’t read news, I do pay attention to news announcement time and dates. Since there is short term volatility in the market during news announcement, it is important to accommodate that volatility either through larger stop losses or by avoiding any new trades immediately before or after major news announcements.  

1. I Need Price Related Information

Here’s a fact that you need to know about me. I am not an economist neither am I a researcher. I graduated with an engineering degree and my education has shaped my thought patterns so that I am only capable of processing facts and not any ambiguous information. I can deal with probabilities but that works when the information I get is relevant.

dataUnfortunately, there is too much information about the market. The situation gets worse as access to information becomes easier and faster with the growth of high speed internet. In fact, many new traders struggle with this as they get information overload and it is challenging to interpret all of those information at an early stage of their trading career

Don’t get me wrong, news is useful and I need it to understand the macro economy. Hence, I read the Economist (an economic focused magazine) on the weekends. However, half of the news release only provides market forecast and opinions – which generally does not represent facts.  More importantly, I find that the volume of information churned out by the media has little relationship with Price (as market sentiment has a major influence as well).

On the other hand, all I need simple facts when I trade. Debating about what the Fed said about the US economy is less useful compared to seeing Price Action (like higher highs etc) on the charts.

2. Macro Information is Not for Short Term Traders

Here’s another thing. Macro news is absolutely crucial if you are a long term trader. Irrespective of being a currency or stock trader, macro information is useful to give you some direction of where the market is heading. Of course, you need to ensure that you are learning how to interpret that information and learn how to use them appropriately as well (which is a separate topic all together).

As a short term trader, macro information is less relevant to me. More often than not, big news announcement (when it happens) shakes up the financial market and these data becomes catalyst of new market trends. However, I am a trend trader and, (1) with good risk management, I can afford to absorb those losses when the trend goes against my trade. But, (2) more importantly, when the trend is established, my profits are more than sufficient to cover my previous losses.

Meanwhile, I don’t act or trade when the trend is in the middle of change – I usually sit aside and wait till the new trend has been established before I act. During those periods, I try to find non-trading activities to fill my time instead.

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Can you see how I find serenity in trading?

3. Information has been Incorporated into Price Action

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Because the larger market players like the banks and major financial institutions have access to up-to-date news release and research papers, they tend to learn about certain news before the average private retail trader. On top of that, they would have hired a team of researchers (mostly with Ph.D qualifications or above) to analyse this information from every possible angle before they enter the market.

At the same time, these financial institutions have deeper pockets than the average retail traders as well. Right? Because they have deeper pockets, the chances are higher that they can influence market prices easily. Right?

If both the scenarios above are true, then do you not agree that most of the news information would have been processed and incorporated into price action by the time we (the average private retail trader) read that news?

And that is one of the true facts of trading. Price action often behaves the way it behaves because all market data have been built into price.

Of course, we are focusing on the currency market or the blue chip stocks where it is very difficult or nearly impossible for a single party to drive the market.

4. Focus on My Trading Edge

Now that I’ve discussed why news does not carry much weight in my trading, here are more reasons why I trade without news.

Firstly, you need to focus on your trading edge. If you are reading this right now, the chances are, you already have a trading edge too. You are either aware of it (which means you need to start maximising it) or you are not (then you should start learning how to find it).

For me, my trading edge is trading price patterns. I truly believe that price patterns have incorporated traders’ behaviour, market psychology as well as news information (as mentioned above). Hence, I need to leverage on my beliefs and create a sold structure for it – and this is why having a set of trading rules that includes your trading beliefs is so very important.

Then I learn to improve it through back testing my rules and I learn to find price patterns in the past. Here’s another interesting point, when I back test my rules, I only look for price patterns and never have I compared those patterns with news released at that point in time. So, if my trading edge is built without looking at news, then that should be consistent even when I trade a live market.

Conclusion

There are many ways to trade the financial market and I choose to trade without the news. I belief this helps me avoid chasing for information as well as over analysing the market data. On the other hands, by not having to read the piles of news release, I have time to relax and to remain focus on price and to continue as a full fledge price action trader.

Thank you for reading and happy News-free trading!!

 

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