Good News, Bad News, What News?

There has been a lot of economic news recently (bank collapses, US dollar declines, etc.), so it is a good time to remind new traders (and many experienced traders) why they shouldn't be paying any attention to the news.

The news that is reported in newspapers and on the television is designed to be entertainment for the general public (i.e. non traders), and it therefore has absolutely no value whatsoever for professional traders. Even if the news is economic news, by the time it is reported in the mass media, the markets have already reacted to the news, and the professional traders have already made any trades that they were going to make.

Trading systems are created and tested using historical market data (prices and volume), but not historical news, so the results of the testing include trades that might have been made during news reports. If a trading system was designed without taking news into account, it needs to be traded without taking news into account, otherwise it is not being traded correctly. Even if you have a trading system that includes news as one of its indicators (e.g. a fundamentals based trading system), it should be traded using a professional news service (such as Reuters' NewsScope and Sentiment Analysis), rather than news that is designed to sell advertising.

Professional traders do not have any news sources around them while they are trading. If you are one of the many beginning traders that think that you can watch television, or listen to the radio, or read the morning newspaper while you trade, think again. Watching the markets drop rapidly, while you are listening to a dramatic news report, and not jumping in a trade, takes extreme discipline and self control. If you remove any news sources from your trading environment, you will be able to trade your trading system without any external interference, and will have a much better chance of being a profitable trader.