I have an open mic policy in my trading room, which allows members of the trading room to communicate with me during the cash trading session. It is not uncommon to talk to a member of the room and hear the financial network rumbling in the background. It is my belief that trading while listening to financial news can be very detrimental to your trading success. These networks typically instruct individuals to assess current market conditions and provide forecasts on various aspects of trade and investment.
But there is a particular problem with getting trade information from the network. They all have an agenda that you can, but it doesn’t have to supplement your trading. In addition to having an agenda that is usually based on the political affiliation that the network nurtures, many of these guys are only speculating about the possible outcomes of day-to-day market activities. What is good?
To be a profitable trader, it is necessary to make your own chart analysis and start trading based on that analysis. In the short term, charting alone is an acceptable trading method, along with a dash of real-time indicators. There is no doubt that a television “talking head” can predict short-term price movements.
Today has been a great example of why your analysis is much more valuable than online brainstorming. I often listen to one or more financial networks before trading starts because I am interested in stock issues that affect the NASDAQ. There was a general consensus among this morning’s panelists that NQ would make a new high in the morning.
Guess what? The morning NQ action was negative, not upside down. The market did not try to gather in the slightest, but it remained in a humiliating channel to continue and spent a good part of the time testing new lows. So much for the television forecast. Usually, these are just generic guesses that often coincide with stock issues in the speaker portfolio. What’s worse is that there’s a good chance it’s just simple speculation about what could to happen
Another great example of the misinformation spreading by these “talking heads” is the market projections based on the direction of futures overnight. In my experience, because futures prices fell overnight only indicates a small correlation with what the cash session traders planned for the day. So the next year you hear, “An overnight futures price action indicates that the market is going to move down,” you can usually dismiss the information as nonsense. Overnight traders and cash traders are two different groups and often have different goals and motivations.
In short, listening to music or just enjoying the silence while trading and trading the advice given by “experts” can lead to you (or me) being biased. The day when you have prejudices of suspicious differences is a recipe for a trade disaster. Do yourself a favor and give up the “expert” and make your own trading decisions based on what you see on the chart.