Will fundamentals make you mental?

the-price-is-right

So the question comes, “Will fundmantal analysis make you a mental mess?” I say Nay! Why? Because…

The price is always right. Trade the price and not the news. I shall explain.

Lets take a story of two traders. Trader one is Hank and traders two is Norm. Hank is a fundy trader and Norm is a price action trader. Lets say they are both trading Non farm payrolls. They are both trying to catch the BIG MOVE that is about to take place. Time ticks down to the news release. Norm puts on his trade because of a technical reason. Hank puts on his trade a few seconds later when he hears what the news is. They both get stopped out at -50 pips. Hank was long and Norm was short. They both lost.

So one man played a technical move and the other man played a fundamental move and they both got handed over to the gods of money? What the crap, you ask.

Well, in my humble opinion, The big wigs out there all know when there is a news announcement and they all try to push the market this way and that way to take as much money as possible out of the newbies pocket. I think the conversation might go something like this, ” Mr. Banker, why don’t we margin call all of the traders without stops this morning?” They might push the market so much that if you don’t have a stop in place, you get margin called if you are trading at 100:1 leverage. They might push it just far enough to take out a shitload of stops before moving the market the other way. There are all kinds of games played out there to take your cash.

So how do we get around this? It is very simple. Don’t trade the news. Trade the price. If you are caught in a news announcement that takes out your stop in 10 seconds, well that is your own fault for not knowing the news announcement was taking place. I don’t think that deviating from your original idea is a good idea because even if the news is good, price could go the other way and it often does.

How many times have you tried to guess which way price was gonna go right when the news broke? How many time were you correct in the short term? How many times were you correct in the long term? There are so many things that affect the economies of the world, even economists have a hard time deciphering the news.

It is a lot simpler to watch a price bar. wait for the news to come out. If you were going to place a trade today, let the noise die down a little. And then get into the trade.

Just my two cents worth.

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