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#247: Why I Am Not a News Trader

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Why I Am Not a News Trader

In this weekly video:
00:27 – The charts tell me everything I need to know
01:08 – News trading confuses many traders
01:40 – Real trading examples
03:00 – Daily charts from Wednesday 18th and Thursday 19th October 2017
04:20 – 10 hours after my trades were taken, the news was announced

I'm going to talk about why I'm not a Forex news trader. Let's get into that and more right now.

Hey, traders, Andrew Mitchem here, The Forex Trading Coach at video and podcast number 247. I want to talk a little bit about a controversial topic.

The charts tell me everything I need to know

It's all about why I am not a news trader. I'm a technical trader. The charts tell me everything that I need to know, and I've got some great examples to share with you. But first of all, news trading. Now, in the past I‘ve had some people, some well-known traders and some well-known trading companies, criticize me quite heavily for saying, I'm not a news trader, and I'm a technical trader only. Now, I'm aware of the news, I'm aware of the fundamentals, I'm aware of the news results, but I don't trade specifically the news. And the news announcements, they don't influence my trading. Why? Because charts tell me everything that I need to know.

News trading confuses many traders

And I believe that in many cases, news trading actually confuses people, whereas if you understand charts, you understand the technicals, what the charts are showing you and where the market is moving, that in my opinion is certainly for me and for my clients, is certainly the most profitable way for us to trade, and enjoyable trading method, because we're not set watching the charts all the time, and we don't have to sift through all this information of different fundamental announcements.

Real trading examples

And so I want to give you some examples. So, today is Friday, the 20th of October. Yesterday, the 19th of October, at New Zealand here, we had a new government formed, and it was formed last night my time. But ten hours prior to that announcement, I announced on my membership site, and also freely available on my website, so you can go and have a look at my daily post and daily analysis for Thursday, 19th of October. And you'll see on there that I was looking at selling quite a number of the New Zealand dollar currency pairs. And I specifically said to clients, I'm selling the New Zealand dollar, Canadian dollar, and also we were buying the Euro against the New Zealand dollar. And the reasons have been purely technical. The charts were showing some fantastic trading setups. We had the entry and exit levels, and before that news announcement even came out, before that government formed coalition, partnership between three different political parties came out, we'd already been filled on those trades, and we'd already been taken out of those trades for full profit. Made a fantastic profit on both positions, Euro, New Zealand, and the New Zealand Canadian dollar.

Daily charts from Wednesday 18th and Thursday 19th October 2017

So go and have a look at the charts. Go and look at the setups, the daily charts of what it was showing, at the end of Wednesday, the 18th charts, because of course, that's what we were looking at at the time. The big sell-off on the New Zealand Canadian and the big upward movement on the Euro New Zealand, the Euro New Zealand moved about 420 pips, and the New Zealand Canadian moved at about 190 pips. So we'd actually pick that in advance of that happening, and that's the important thing. You know, it's all well and good to say, “Yes, I know that the New Zealand Labour Party go in, and that's bad news for the New Zealand economy.” And of course it is, for me personally as a national supporter, it's really bad news. But it was reflected in the market that the market did not want labour party to get in, and therefore has weakened the New Zealand dollar. But don't forget that that's all well and good in hindsight. You need to be able to see that in advance, and to take action on that in advance. And that's exactly what we did, and that's why as technical traders we're profitable as technical traders, because we can see what the charts are showing us in advance of any news announcement, or anything like that happening.

And we take the trades with the entry and exit levels that we use and we understand and I teach as part of my course, so my clients have that information, and ten hours later, the fundamentals came out.

10 hours after my trades were taken, the news was announced

So ten hours later, first of all you didn't actually know when that announcement was going to come, because it wasn't actually a timed announcement. You couldn't look on Forex Factory or anything like that. And we knew sometime on Thursday afternoon or evening time it was likely to be announced. So, first of all, if you're a news trader, you'd have to sit around and wait for it, but by the time it actually came out, the market had already affected most of that, and the New Zealand dollar crashed through most of its movement anyway. So it would've been very unlikely that you're going to get good profit as a news trader at those announcements. Yet, ten hours prior, and something that took me five, ten minutes to do, and to type down and write, and to take the trades, we were already out of that trade or both of those trades for full profit.

So, you can see the difference there. If you are a news trader, I'm not saying it doesn't work, I'm certainly not saying that. So don't get upset or get offended, because people do. I'm not saying that. If news trading works for you, absolutely fantastic. Stick with it, well done. But for me as a technical trader, we're making money from what the charts are telling us.

So I hope that helps. This is Andrew Mitchem, The Forex Trading Coach, I'll see you this time next week.

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  • George

    News trading is greatly misunderstood by the majority of trading educators. The market prices in the news before it is released. Economic Forecasts provide sentiment, positive or negative, so you will often see this being played out before the release. Once the actual data is out, if the forecast was positive and the data release was positive, guess what, the price is ‘overcooked’ and will likely do the opposite what the traders not understanding news releases expect. When the market spikes, it’s most commonly the result of a withdrawal of liquidity rather than traders getting into the market, as the market during announcement is often very thin. It’s much safer to trade many hours before the news based on sentiment, or after the release based on whether the market is over or undercooked as described above. Understanding how the institutions work, that’s what trading is all about. Contact me Andrew, I could provide a great deal of insight and value to your course. All the best.

    • Andrew Mitchem

      Thanks George. Glad to see you have a method that works for you.