Why I Will Never Trade The News
Today’s article is based on my personal trading experience over the last 14 years, and over the course of my trading career I’ve arrived at the conclusion that ‘news trading’ and fundamental analysis are completely unnecessary. Avoiding news and economic indicators is obviously a controversial topic in the trading world; some people swear by only fundamental analysis, some by a combination of technical and fundamentals, and some trade purely on technical analysis.
I am about as far into the technical (price action) analysis camp as you can be, I believe very strongly that the price action of a market reflects everything we need to know about it. I personally don’t trade the news or use fundamental analysis in my trading, and I honestly feel it is a big part of why I’ve been successful in trading. This blog is about my experience and what I’ve seen over the last 14 years analyzing and trading markets, for those of you who take my ideas seriously, this article is going to help you remove at least half of the confusing clutter that is probably negatively affecting your trading every day…
Are you a technical or fundamental trader?
If you’re a beginning trader you probably are feeling a bit overwhelmed with the whole “technical analysis or fundamentals debate” and everything that goes along with it. However, you’re going to have make a decision on the matter sooner rather than later, because there simply are just WAY too many variables scattered across the spectrum of technical and fundamental analysis, and you don’t have the head space, time or ability to make sense of them all….but perhaps more importantly, it’s completely unnecessary and even counter-productive to your trading success to do so!
It is my hope, after reading this article and some of my other lessons on news trading and fundamentals, that you will give a long hard think into what really makes sense to you and what doesn’t.
I firmly believe that traders need to choose between technical analysis and fundamental analysis. I also do not believe in combining them. Trading, perhaps more than any other profession in the world, is an extremely easy thing to over-complicate. It is this over-complication and over-thinking that causes traders to continuously make ‘stupid trading decisions’ (I’m sure you know what I’m talking about here).
It is my belief, that by cutting out all news and fundamental analysis you can quickly and permanently eliminate half of the clutter from your mind that’s causing you to over-think and over-complicate trading. This will allow you to take a much clearer and cleaner approach to the market, which will naturally reduce the amount of ‘stupid’ trading mistakes you make as well as lessen the temptation to over-trade. At the end of the day, everything that happens in the world that affects a market is reflected via price action on the market’s price chart. Thus, all you have to do is accept this fact, which you can prove to yourself simply by observing price action for a while and seeing how it often leads the news or acts independently of it…
Price action is a leading indicator
There’s a lot of talk in the trading world about the “Big boys” who trade really big lot sizes or who trade for banks / large firms, etc. Well, some of it is just myth and paranoia, but the one key aspect about the “Big boys” that is true is that they are, shall I say, more well ‘connected’ than smaller everyday retail traders. They have the ability to influence price action and make the market move and sometimes they can find out what is going on in the world before the rest of us and act on this information before the mainstream news media outlets have it.
In the end, it doesn’t matter if the “Big boys” get the news before you or at the same time or after you, because they are trading such big size that the market moves when they enter it. It is your job as a smaller retail trader to learn to trade based on what the “Big boys” are doing and that means learning to trade from price action.
At Learn To Trade The Market, we subscribe to the belief that price action is the best way to define the market, analyze it and find trade setups. Therefore, we believe that the underlying price current and price dynamics are what determine what a market will do next, not for example, the Russians moving troops into the Ukraine as we saw recently.
Financial media outlets want you to believe otherwise, that’s why the mainstream consensus is that there’s always a fundamental reason behind price movement. There’s an entire industry that depends on making you believe economic news reports and world news is what moves the markets and is what you should pay attention to. So, their livelihoods depend on spreading this myth and misinformation, but they have no understanding of price action, which is obvious by the lack of attention it gets on major financial news outlets like CNBC, Bloomberg and others.
The big news events are priced in, the ‘Big boys’ who are in-the-know have already priced in the big events…or rather their expectations of them, which is all that really matters anyways. You see, the key reason why the news simply doesn’t matter and why I will never trade based on it, is because what really matters is what market participants THINK about how the news will affect the market. People trade their views on a market, which are often contradictory to the news and what it implies. All that matters is the aggregate of what market participates think a market is worth, and this is reflected via the price action, not the news. People tend to trade their expectations of a particular news event, as I just mentioned, so when the news comes out it’s essentially ‘old news’ already and doesn’t really matter anymore. This is where the old Wall Street saying “Buy the rumor, sell the fact” came from.
“The proof is in the pudding”…
Talk is cheap, as they say, so let’s take a look at some recent examples that show why news is irrelevant as well as how price is a leading indicator…
It’s important to note that the examples below of Oil and Gold took place over about the last two months. In both cases, the price action was clearly leading the news because we had obvious uptrends in both markets. One good example is the recent geopolitical unrest in the Ukraine, with Russia threatening military force there to take the Crimea peninsula. Typically, commodities like Oil and Gold will rally during threats of war, especially in countries rich with natural resources like Russia. Clearly, both markets were already sailing higher well before this tension between Ukraine and Russia really took center stage in the media as it has recently.
Another example is Non-Farm payrolls (NFP) from January of this year. They were forecast at 185k but came in at just 113k, well below expectations. The Dow and other indexes have pushed significantly higher since these numbers were released, but a lower NFP result is typically seen as ‘bad’ for stocks and riskier currencies as well…just another example of why the news really does not matter at all.
Crude oil – Bullish trend remains intact despite global news and economic events…
In the chart below, we can see that Crude Oil has been in a strong uptrend since about the middle of January. A lot of news has come out during the course of this uptrend, both good and bad, but all that mattered to a price action trader like me, was that the market was clearly in a strong bullish trend. When you trade with the trend, you will do yourself a HUGE favor by completely ignoring the news, because the news is only going to contradict what you see on the chart in most cases and cause you to second-guess a strong trend like this one…
Gold – Gold surges higher despite news and ‘analysts’ views
Another excellent example of why the news doesn’t matter has been the Gold market. We can clearly see in the chart below that since December 31st 2013, gold has been surging higher and in a very firm bullish trend. If you look back at economic reports and ‘analysts’ views over the last 2 months, you’ll no doubt find many who were bearish on Gold and economic reports that implied Gold should go lower. But, it does not matter. What matters is what market participants (mainly the ‘big boys’) believe Gold is worth, and over the last two months they clearly felt Gold was ‘cheap’, thus it’s been in an uptrend…
Ignore the news to eliminate two common trading mistakes
There are two HUGE mistakes that looking at news and fundamentals tends to cause traders to make:
1) When you’re in an open position looking at news, it will influence you in some way, whether you think it will or not, it will. Looking at news while you’re in an open position can make you change your mind about the trade, even if the price action and the technical picture have not changed at all. It’s a ridiculous thing to assume that because you read something contradictory to the trade you’re in, the market will somehow turn against you. There are literally thousands of variables affecting a market at any given time, the few news items you have time to absorb are not going to matter.
You need to remember that you need to stick to your trading method and your trading plan, because if you don’t, you’ll never know if your method works because you won’t give it a chance to play out. Intervening in trades because of some news report is almost always a bad idea, and in the odd chance it works out in your favor, you’re just reinforcing bad trading habits. The only reason to ever intervene in a trade is if the underlying price action dynamics change, you can read more on this in my article on how to exit trades.
2) The next big mistake that looking at the news can cause you to make is that it can convince you to stay in a bad trade. People have a tendency to want to find news and ‘other supporting’ factors to convince themselves that a trade there in is not failing, even if it clearly is. This causes them to do all kinds of things like move their stop losses further away or even delete them all together because they are ‘sure’ the trade will ‘come back’. It can also cause traders to try and add more positions as price moves against them because they are ‘convinced’ the market will move back in their favor from that ‘expert’ report they just read. In reality, what typically ends up happening is that you end up having to swallow a MUCH bigger loss than had you just ignored the news all together. Losses are part of trading, you cannot avoid them, but looking at news to try and find ways to ‘confirm’ your trade typically means you’re trying to avoid an inevitable loss, which ironically results in a much, much larger loss than you ever anticipated.
In summary, if you just remove the news entirely, it will eliminate the potential of making either of these mistakes. Just put in your trading plan that you need to remove the news from your trading, make ignoring the news a habitual part of your trading routine and something you consciously do, otherwise you’ll probably find that a ‘sneak peak’ of CNBC turns into a full-blown news addiction you can’t control…the financial news is almost everywhere these days.
Some of you reading this will have experienced a lot of the things in this article, but you may still not be convinced even after reading my views and your own experience. However, sometimes in trading, just as in other areas of life, you need to make a decision even if you aren’t totally ‘convinced’. Successful traders share a similarity with people who are dedicated to getting and staying in shape; sticking to a diet and exercise plan and being disciplined with it means cutting certain things out (too many beers, McDonald’s, being lazy, etc). Successful trading also requires you to cut out the things you don’t need; if you try absorbing and using everything you see on the news, you’ll quickly blow out your trading account.
At the end of the day you may not 100% believe what I’m saying here, but you have to subscribe to a belief system and you can’t just subscribe to everything. You have to decide how you’re gonna live your life as a trader.
A lot of the ideas presented today will deeply resonate with new and experienced traders alike, based on my experience in the market, I am 100% confident that following both news and technicals, will eventually lead to financial disaster. It’s also my firm belief that one should follow technical analysis (price action) instead of fundamentals and news. My experiences taught me that a trader really should follow a limited amount of data to form decisions as opposed to letting everything he or she is exposed to create their opinions of the market.
It’s my hope that today I’ve helped you decide that you now need to go forward and decide to well and truly change the way you think. I can guarantee you that by following just price, you’re going to totally clear your head space and remove a lot of the mental confusion and clutter out of your trading. It won’t be easy, but next time you walk into a room and see financial TV on or see financial magazines, hold back, don’t get sucked into the unnecessary world of news and fundamental analysis. To learn how to trade only with price action and ignore the news, checkout my price action course for more information.
56 Comments Leave a Comment
I know this was probably written years ago, but undoubtably it still holds true today, human nature being what it is, and never changes.
I have decided to completely eliminate news from my trading.
There! I feel less stress already!
Thank you for this article, Nial. It really resonated with me.
You really reflects your experience, price action is biggest indicator of market. Thanks for valuable writings.
Thanks! Glad you are enjoying the article.
Hi Nial, should I take a trade that matches my kindda trade but has impending news release?
Glory be to God for having you as my mentor, before I came across your tutorials I was following news but all was in vain however with your price action strategy am in profits due to the pin bar of WTI oil that formed last week.
I need more of your tutorials as a beginner to strengthen myself
Nial. You are so good I am a small trader in Athens Greece and thanks a lot for the good advise not to trade the fundamentals but go with the action that will be my religion from now on
Your Honesty is a rarity.
Oh so true…..this provides perfect clarity based on my own learning experience. The vast majority of my losing trades on my demo account up till now, have been as a result of news influencing my decision making…..contributing to bad decision making and emotion. As from now….no news is good news for me. Thanks for the clarity Niall.
Thanks for this, I was so confused until I see this. Great help!!
You’re not only a great trader.. you are also a fantastic teacher and wise philosopher.. u r the best Nial..
Thank you for clarifying why its not good to trade The news. Of course your Artie was all that i needed to see the picture. Now I understand why the big boys move the market and we respond to their moves and not the actual news itself. You answered my email with rapid speed. Keep up the good work man.
I agree with nial fuller ,on this issue ,their is just to much media hype in trading the markets. The economist take a world view of whats going on in the here and now, and they compile all of this media hype and try to make common sense of world marketing events. They are usually wrong in their analysis of world marketing events. So i agree with the above article.
Nial, your honesty is a rarity.
Excellent article !
A wonderful nd excellent article keep it up
nice articles you right nial please keep on writting more, u give me alot of confidence when i read your articles
I believe there are certain news events that do move the market you cannot ignore that fact. Nial even though you say you don’t care what the news says I’m sure you have looked at them as well. Interest rate monetary policy and NFP are market movers which have been in place for decades. Markets have moved based on the figures or the monetary policy changes.
Yes, they move market but is just for few minutes, after the spike the market will go back to it’s real direction based on how it was trading before. This is how it happens, the big boys are not constantly changing their positions, the news follow their positions and some of them can leave trade running for weeks. The bottom line is, don’t mind the news, just trade your price action on higher time frames and use very low lot size to give room for pull backs. Nial is right.
Thanks You so much Nial
Good points, Nial, thanks for posting
I agree Nials. That’s how these financial websites make there money. Selling news to people who want to listen.
News is what the Financial kingpins want us to think. Fellow traders don’t fall victim to it.
Great article, thank you! Good trading to all.
totally agree,Great article, thank you! Good trading to all.
Nice article. I totally agree that trading the news leads to losing money. I speak from experience. I think we are not able to interned the news to price action correctly. But one thing puzzles me. If the “Big Boys” make the price move. What do they base their action on? Is it not the world news? How do they know how the news affects the market? I think they must be Ancient Aliens : )
great article, as many trades I wanted to get into news and fundamentals, but after all you have said in this article I am going to leave it for a year or two :)
I would want to believe you. I have experienced similar things in my trading experience. I couldn’t agree more. But I am not yet successful. But your article was really helpful in clearing the clutter of my mind. I believe I will be testing my trading strategy with much more confidence now.
Thanks Nail, you are a great teacher
dear nial, very nice, article, very useful now a days, i expect more the articles like this
Personally, i totally agree with this article. I ignore all the news when trading because i focus on weekly and daily time-frame, except the big ones like NFP & FOMC or Interest, i will minimize the Risk or lock some Profit if possible, but if not, i will let my positions run itself. In my experience NOT ALL my positions loss, applying the Risk-Reward method and probability math, it is not too important to be concerned. What really matter is market perceptions and expectations, and these are reflected in price action. So for me, your article is great knowledge .. Nial.
Thank you for another great article ….
yep, this is a case of less is more … well written and thanks for taking the time .. thanks Nial.
Another great article, Nile! I wholeheartedly agree with you. News = Noise; News = Distractions for individual traders. The second we start paying attention to news, we consciously or subconsciously try to play market analysts, psychics and draw all kinds of subjective speculations / conclusions on market biases. Trade what we see on the chart because the market reality and responses are represented by Price Actions.
It’s true some of the top traders have been fundamentalists for years. But they’re full time fundamentalists, not part time. So a simple question we can ask ourselves: do I want to have the life style of spending only 30min~1hr a day on trading to gain time and financial freedom or do I truly enjoy being buried by constant worldwide news and having 2 jobs – a market analyst and a trader at the same time?
Good one, Thank you
totally agree about this one !
whenever i trade the news i lost money 95% of time, I agree with this article ….
I commend and admire you a lot but i strongly believe in the technical part of analysing the market, but after over 5 years i wont say neglecting the news totally is a safe thing to do, especially for intra-day traders.
it is always nice to be in the know of which news is coming out at different times, not necessarily trading them or instigating a position but as a cautionary measure.
Without an eye on the news you can be 70percent accurate but with an eye on it you can be 80percent more precise.
Most trades that go against you after good price-action analysis when checked properly were as a results of these fundamentals.
Good one, thank u sir.
just perfect article (as always). Thank you so much for your efforts!
All the best,
great articles and nice thank you Nial Fuller
This is 100% correct in my 3 years experience as a trader. Price is a leading indicator of news. If you’re in a trade and price action is confirming your trade direction DO NOT exit the trade cos a news event gives an opposing view.
What about when we trade by 4 H chart, instead of Daily?
Thanks for your priceless advice, commentary and course as I’m your member since Julay 2013.
Hey. mr Fuller I agree with your thoughts but I’d like to add another thing to your words about todays topic. I agree with that it is very difficult and do not work very well or do not work at all to trade on news and fundamental data prints, but for me is very important to be in touch with monetary policy of the G7 countries just to know what they think to do in mid future. For example in the last octomber BoJ said they want cheap yen and they said “we’ll do whatever it takes to make the yen weaker” so the yen crosses exploded in great trends. I hope you got me! Regards, P.Valyovski !
Thank you for this insightful -and I must say, penetratingly perceptive-article. You’re right, I want to believe everything that you’ve said, but I know in my heart of hearts that sooner or later, I will fall prey to the temptation of ‘taking a peep at the news’: even as I write, I sense a great struggle has ensued within me; I just can’t envision myself trading in complete isolation from it. And this despite the fact that I have often witnessed the price action of certain currencies behaving in a way that is inexplicably contrary to the way that the economic fundamentals would suggest (ironically, the ‘experts’ sometimes comment on this seemingly strange phenomenon, and then simply go on ‘prophesying’ just as if it had never happened).
Funnily enough, last week, I had thought to send you an email asking you your thoughts and expert opinion on the foreign-exchange market manipulation that had been widely reported ‘in the news’…Is that something we should not pay attention to?
Great article, Nial. You are a wise and patient mentor. It is extremely encouraging that you believe in your method so unwaveringly. Thanks!
The Best Ever!
This has indeed been a controversial approach by most traders but in my opinion, i have always noticed that the market obeys the principles of price action setups. cheers
Nial, I actually felt a huge burden being lifted while I was reading this. As a ‘Noob’ to forex, it was beginning to get a little scary with all this news going on. Talk about clutter in the mind.
I can see quite clearly how just the technicals alone can show you the way to a good/bad trade. It also helps to become less emotional about what is going on and be able to take a neutral approach to trading.
Quite often when looking for and finding what appears to be a good time to enter the market, the idea pops into mind: ‘Remember the Ukraine situation. That will make the market go down/up, forget it, don’t trade, do trade, yada yada, blah, blah’ which completely confuses and stuffs you up.
Your article is so spot on it’s a big relief I don’t have to listen to that news anymore.
Great article, thank you! Good trading to all.
i have been following u for few years already and i can clearly see your self development as trader and a teacher . some of the insights you shared were very valuable to me.
thank you for sharing and keep on with the good work u r doing.
best of trading
Nial, It is hard to believe that I do not need to know about the news. I say that, because from my little experience, I have lost on open positions due to the news. When I see the charts I realize that some big turns happen after the release from the economic calendars.
thanks Nial…great stuff
Nice article Nial. Thanks a lot again. Your filosophie of trading has a high impact on mine.
I was one of them who blow accounts just for seeing the fundamentals.
Good shot at a rather controversial subject