Since the Fed announced the non-taper on September 18, the market has fallen just about every day. Climbing “walls of worry” and then “fading good news” is what Wall Street does best. If you can’t wrap your mind around this paradoxical behavior then you shouldn’t be paying attention to news in the first place, because it will bias you in the wrong direction.
Few people actually trade news systematically and effectively, which is why I generally advise traders not to have a news component in their trading plan. In reality, most traders simply react to news, so it becomes an overlay on the trading plan that adds randomness and emotion through the backdoor.
Still, it can be difficult to pull the plug on the media. Why is it so hard?
Modern screen trading is a lonely business. News feeds like Bloomberg or CNBC are unlikely to help you make better trades, but they will make you feel more connected to a larger world. The question is, what price do you pay for that bit of virtual camaraderie?
I think people join live trading rooms for the same touchy-feely reason. I spent years in various rooms watching trading wizards, but I don’t remember making money while I was enthralled. The essentials don’t seem to get communicated in a virtual apprenticeship.
In fact, being in a room with a guru doing his/her thing put me in a passive, follow-the-leader mindset. Plus, regulatory bodies make it necessary for room moderators to keep things vague so the audience is usually one step behind. The best traders in these rooms are in the background minding their own business and use the room as auditory wallpaper.
In your own trading, what distracts you? If it isn’t a news feed or a chat room, it is your email, or your Facebook page, or texting on your phone? I recommend approaching trading like a business. If there were a ‘boss’ in an office nearby, holding you accountable for being focused and productive, how would you behave? Would anything be different about your trading?
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