People often talk about the news and how it affects the markets and trading. Because of this, traders are advised to pay close attention to news releases to help with trading decisions. One of the Maximum Lots readers recently asked me if I consider the news when trading and the answer is no. I'm going to share why.
When I first started trading I was told the same thing that many newbies are; make sure you know what news releases are coming out each day and be careful when trading around news times as the markets can be volatile. What I noticed however was that often there is little or no reaction to the news, even when it is listed as "high impact" news. I still continued to follow the news as this is what I was taught.
When I learnt about supply and demand this completely changed my outlook. I believe Sam Seiden said something like any and all influences on price will be reflected in price. This made a lot of sense to me. Ultimately we are trading price. It's price we analyse to make our entries and exits so we should focus on the charts. After that point I removed news from the my analysis.
What I see is supply and demand levels being respected or rejected regardless of what the news says. In all the trades I share on this website the news is never mentioned and that's because I don't consider it.
Lets take a look the GBPUSD and the story that's been all over the news for the past few weeks, the Scottish Independence Referendum. The Scottish had to vote on independence and there has been lots of speculation over which way they will vote and what it would mean for England and the rest of the UK if Scotland did vote for independence. I've heard a few traders saying that they're not touching GU until it's all over given the uncertainty and the fact that the markets may have a major reaction which could be volatile.
Those who subscribe to my weekly forex updates will notice that I highlighted GU for long opportunities last week. I'm not bothered which news is coming out. If I see opportunity I will take it provided if meets my trading rules. If you didn't see the forex outlook for last week it's here.
An opportunity came up days before the news release and hundreds of pips were on offer for those willing to participate in the market during this time.
Supply and demand will tell you what you need to know about where price is likely to move. This should be the focus.