Wealth Warning: It has been determined that listening to the news may be bad for your wealth!
From a very early age we are bombarded with news from television, radio and newspapers. We live in the ‘Information Age’ and are presented with a mass of information any time of the day or night. Most of the news appears to be correct and entertaining, and usually you see no reason to challenge it. It may be biased, or not even correct, but usually you see no reason why you should be bothered to challenge it.
Printed news is basically collected to sell newspapers and ultimately newspaper advertising. The human mind tends to be open to suggestion. You want to believe all the news, it helps to make life easier. All the important facts from around the world have been collected for you and presented to you in a form which is interesting, entertaining and easily assimilated over a cup of coffee.
This is all very interesting – until you decide to start trading the stock market and start using this type of news for your stock market advice.
Trading Based on News
Trading means you are exposing yourself to risk (Learn to Understand The Risks). You have now entered the arena where your skills as a trader are going to be severely tested. If you are going to trade, then you are going to have to look at news and newscasts in a whole new light. News is no longer entertaining, but has now become a worry to you. When you see or hear a story that affects your interests you are going to have to ask yourself three questions:
- What does this story mean [if it is true] in the overall context of my prior analysis of the market?
- What use can be made of this story by others working against my interests?
- What use of it, if any, can I make to better my own trading position?
You have been brain-washed from a very early age. You are now very receptive to news. When you first enter the stock market arena and still a little ‘green’, you will naturally think it will help you in your stock market activity if you are a keen reader, keen to assimilate as much information as possible. This is perfectly OK if you remember to read between the lines. You also want to take advantage of ‘news’.
This is where your troubles start. It is natural to think that the market will go up on ‘good news’ and down on ‘bad news’. This must be right because they tell me every day on television that this is so.
To become a stock trading professional you have to start thinking and acting like one. You have to turn away from running with the herd and become a predator, buying on great opportunities caused by a variety of ‘bad news’. As a guide you need to buy on bad news which has produced a ‘shake-out’ in the market and sell on good news after you have already seen a substantial bull market.
Frequently, when very high volume appears in an index or stock, some sort of story appears in the media explaining it away. Do not listen, or allow any news to influence your judgement.
These news stories are mostly half truths and rumors.
Trading is trading!