Ignore the News, Focus on the Price
Sky News Business Channel (Photo credit: Wikipedia)
When you are trading in the Forex market, you must follow what the traders say – ‘Buy the rumor and sell the fact’. This saying is for all those people who watch the news and try to work out if the news will be beneficial to them or not. And, this saying means you should start buying and taking a position when the rumor is afloat and when the rumor becomes a fact, it is at that time when the news actually comes out, and you must sell and exit.
The problem with fundamental analysis is that when you rely too much on the news, you may lose out. As a trader, you may try to decipher what the news means but by the time you decipher, even though it may be correct, it would be too late to take a position. So the best thing for you to do is that you don’t have to read the news or understand it.
Don’t Try To Understand the News
When you rely too much on the news, you place too much importance on it. Then you start forming a bias and have preconceived notions. Even if the facts tell you otherwise, you believe that according to the news, the market is supposed to react in a particular way. For example, if the news about UK is not good, you will expect the GBP/USD chart to go low and even if the chart says that the currency pair is soaring, your mind will ignore the fact hat is happening.
Most of the traders follow the Forex saying religiously and exit the market when the news is declared. But if you are biased, you don’t recognize this strategy of the big players and as a result will end up losing a substantial amount. This is because, by the time the news is released, price has already factored and the only recourse left to you will be to try and catch up with the big players.
Ignore the News, Focus On the Price
If you are a beginner, then the best advice that you can get is to ignore the news completely and focus on the price of the currency pair. The price chart will tell you all that you need to know. You can see what the other traders are doing by reading the price chart.
In fact, if the price data tells you that bigger traders have already entered the market, then you can be sure that a rumor is afloat. The price will reflect what may happen on the release of the news.
Remember, that some kind of news is always being released everyday. If you start focusing on all the news that is being released, then you will be thoroughly confused, especially if you are a beginner. Just focus on the price action to know how to earn profits.
B. Lyttle is a finance expert and a keen trader since more than 5 years now. She’s a contributor for the popular forex site, Connection 2 Forex.
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Category: Investing
