People keeping track of the news are not necessarily trading off announcements. You are only considering one aspect, namely speed of execution after a release, but you are excluding the contextual benefit of keeping track of news.
I've never understood why people are so intent on convincing others of the invalidity methods they couldn't figure out themselves... One should do whatever makes one the most money!
Thank you for a well-written post, Hotch. I am part of the 5% who keep a news service audio running, and I'll briefly explain common misconceptions about this, using your post as a starting point.
No retail trader is fast enough, so that's not the reason. I'll explain more below.
The market IS traders. Investors, fund managers, etc. could be grouped here, but the market is simply a composite of traders of various types with various objectives. I don't quite see your point here..?
This is the primary reason I hear for people dismissing news. Sure, after some period of time it's contained in price, but maybe it's seconds, maybe minutes, maybe hours, or even days. But that's not the main point.
What is NOT available to you with no news is the context of the reaction. A market reacting strongly to only neutral news is bullish, whereas a market reacting strongly to very good news is merely expected. Even more telling is when a market has a "no reaction." If the consumer sentiment number is expected at 74, and the actual is 76, and the market barely takes notice, the market at this time (maybe only for the next few minutes mind you) is not a very strong market. If the expectation is 76 and the actual is 74, and the market fails to react negatively to this, it's, at least for the time being, not a market you want to short, probably.
Also, Fed days are interesting. When the fed announced it would be extending ZIRP through the end of 2014, I can't imagine a trader not wanting to know this information. Sure, you see the market move, but it takes some time to interpret this information, and it is key monetary policy information, and probably the most important news you could know, particularly for currency traders.
In short, the market's reaction to the news is important, and seeing the reaction without seeing what caused it tells only part of the story.
Again, no retail trader has a chance at "trading the news," it's just too fast. Hopefully the above makes it clear that this is not the priority.
#1 was news related, was trying to explain the other aspects, apparently didn't make it clear. Where did I say not doing what I personally do was invalid? I thought the last bit pretty much followed your exact thoughts, I do what makes me money.
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Yes, retail traders aren't fast enough, but even when I had the best of services, I wasn't personally quick enough.
Agree that the market is traders, what I was trying to convey is that I'm trading the current activity of the participants at the moment, not the fundamentals of the market, I'm not bullish because good things are happening in the economy, I'm bullish I expect other people to buy.
On market interpretation of events. I understand your point, I meant to write a bit on it but forgot. Essentially I don't like doing it. There are a few times I've done it right, but I generally had a plan in advance (last Trichet hike, easy buy rumour sell fact). I am extremely wary of guessing what other people are thinking. Probably because I generally view things differently from others.
There are lots of different expectations of what figures are going to be (and different analysts are worth different amounts), and then there are lots of different interpretations of the figure, and it's just too many variables for me to risk money on. Another large part of it comes down to me trading systematically (not that you can't include figures into it).
You also get into the market being moved by people who don't have the full picture. NFP is a good example, the change, rate, private and public etc is released one after the other. I'm not planning on figuring out what moves are based on what figures, and even if I could manage it, again I wouldn't get a price I liked. I remember a few times, when two different sqwarks would be covering two different things, I'm not going to interpret which is effecting the market atm.
Again, I know people make money doing it, it just doesn't interest me. It's probably a fine place to start, but as I've put lots of effort into other aspects, it's diminishing returns for me, and I'm too lazy.
The last point on trading NFP. I was trying to point out that I trade NFP without looking at the figures (yes, currently trading at home with crappy internet). I don't trade it seconds into the new being posted. It's an observation of what usually happens which is so clear to me I can point out NFP days from interest days etc. I guess you could say it's a chart pattern unique to NFP.
Of course, I often do simple hedges on stocks for news, but that's just because of the volatility, again, doesn't require the figures, because I'm in the trades before they're released.
Hopefully that clears it up.
Dovie'andi se tovya sagain.
The following user says Thank You to Hotch for this post:
Ditto on all counts. I also do not buy because of a good number, but because of the reaction of others to that number.
Who's guessing? Again, it's the market's response to policy, economic data, etc. that is important to me.
There are about 20 to 30 analysts, or so, for any given news outlet who will give an estimate. The median (or I suppose mean) number is determined to be the consensus. It may vary slightly from one news outlet to another, but rarely much at all. For example, this Friday's Michigan CS number is given by bloomberg as a range of 74.0 to 78.6, with a consensus of 76.2, and FF's calendar has 76.2 as a consensus. Very similar in general this way. As for interpretation, yes, many different ways. But this would only matter if you were trading based off of the number itself.
For most major data, the market will only really be concerned with it, not any minor events at the time. For NFP it is fairly simple: how many jobs were created, and the unemployment rate, and lately anyway, how that rate is affected by discouraged worker count. At any rate, I reiterate that the important thing is how the market responds to this.
I wanted to mention this in my last post but did not because I don't want you to think I'm talking about you here, but I do agree: many people simply are lazy and want to look only at charts. I respect that point of view, that the market is all represented in the chart, and I used to be the same way. But the landscape of the market is shaped by more than a chart. It is comprised of social, political, and economic factors, and having the market in the context of this background is a powerful combination that can give us a big picture view of things that a chart alone simply cannot provide, IMO.
I'm certainly not trying to change your style or that of others, but simply to clear up some possible misunderstandings of why news is ultimately so important to some of us. I used to think it was completely a waste of time, and I had misconceptions, and wanted to offer a perspective of someone who has shifted his thinking in this respect.
Do you have to be a member of the site to use the service?
I registered 6 days ago. Received an email that said acceptance could take up to 7 days.
If I click on the Ransquawk service banner, it takes me to the news page. I can get sound on the Test but nothing on the actual news.
The two choices are Test and Forex. That is why I asked if it was Forex only.
If I don't hear from them tomorrow (that will be 7 days) ... I will assume I wasn't accepted. Dang... reminds me of dating.... Maybe they have to wash their hair or clean their fish tank.... those were the answers I got most often when dating... best I remember...
I have sound now ... had to turn the hearing aid up.... I'm going to take a nap now...
I'm just a simple man trading a simple plan.
My daddy always said, "Every day above ground is a good day!"
Last edited by ThatManFromTexas; April 11th, 2012 at 02:56 PM.