I like to trade in my cave where it’s dark, quiet and have no distractions.
I sometimes troll other trading blogs after the days trading is finished and I am always struck by the number of traders who are rabid followers of any tidbit of information on their favourite stocks. They form opinions, certainties and are probably already spending the money they’ll make on those trades. Giddy when the market is rising, angry when it’s down.
My view is that the less information you have the better off you are. Here’s why:
I don’t think that anyone can know everything that’s going to affect the markets or is “qualified” to disseminate it all and form the correct opinion. There is always more news to hear, digest, factor in its effect. What is real news? What is fake news? If you trade a certain way on the news, your expectations will colour your decisions if the trade starts to go against you. How many times have you seen a company announce terrible earnings only to see the stock shoot higher? Too bad if you’re short it. Information in the public realm is behind the times and should never be relied on. On the other hand the charts are always right and they tell you the only story worth buying.
I can tell you that it’s not at all stressful to trade in my sphere of ignorance. I don’t know when FED announcements happen. I don’t know what level the DOW is at. I don’t know when a company states its earnings. I don’t know if a CEO just got arrested. I don’t know if drug company latest product passed or failed FDA testing. I don’t know what the latest non-farm payrolls are. I couldn’t care less.
You see, none of that matters if you are a momentum trader. Let me put it in plain English: You don’t need to know! You can certainly see the effect of the news and that is what you trade. It matters not one little bit what the news is. A person could drive themselves crazy trying to process all the information out there.
Try this instead: Take the hours you spend now looking at news events and spend it instead on mental training. Develop your concentration skills. Your order entry skills, your trading plan. Work on the things that need improvement.
You can’t control the outside world so let go of it and work on what you can control – your actions based on what you see in the here and now.
Since I don’t know what’s happening in the outside world, I rely on a very simple concept to trade. Generally when I see green candles and the chart is rising, I buy and when I see red candles and the chart is falling I short sell. For me anyway focusing on the price action works better than filling my head with information. And at the end of the day it not how much you know or how smart you are, it's how profitable your day has been.
Posts
