In Continuation with Previous Article Are you a “News” Based Trader or Price action Based ?
With the Drama over Fed Rate Hike coming in next few days most of Traders will become obsessed with news events. They get sucked into a ‘black hole’ of staring at economic news calendars from their broker or elsewhere and trying to ‘figure out’ what might happen as a result of them, this is a horrible place to be mentally and it’s very bad for your trading.
Once you convince yourself that XYZ is ‘going to happen’ based on a certain upcoming news announcement, you have set yourself up for the destruction of your trading account. All logic and objectivity goes out the window when you think you know ‘for sure’ what the market is going to do at some point in the future.
The main key to trading success, is remembering that trading is a game of probabilities, not certainties, and trading in-line with that knowledge. When you trade this way, you will naturally manage your risk properly and stick to your trading plan, because you are remembering that any one trade can be a loser and that you never know what will happen ‘for sure’ at any point in the future.
Conversely, when you trade with the belief that you ‘know’ what is going to happen based on some news event, there’s nothing stopping you from jacking up your risk to unsafe levels. This is the main reason why ignoring the news can save your trading account. Ignoring the news removes a lot of the potential for you to convince yourself that you know something ‘for sure’ about the future of the market. It also removes a lot of second-guessing and confusion, and significantly simplifies the trading process.
The more we focus only on price action, risk management and trading psychology, the closer we get to operating from an ideal trading mindset. Often, the biggest obstacle to a trader’s success, is simply flushing out and then ignoring all the information they are exposed to each day. You want to trade from a ‘pure’ mindset and trying to analyses news and figure out how it may or may not affect a market is like a futile game of whack-a-mole that will ultimately result in you blowing out your trading account.
To get started on the path of ‘pure’ trading, focused only on price action, risk management and trading psychology,