There are a lot of people out there who claim news trading is bad for you. They may call it reckless, unpredictable, or gambling. Well if you place a trade right before the news, then most of the time you are gambling, that is true.
But there are all sorts of misconceptions about the news that unfortunately inflicts 95% of all traders, even many successful ones.
Most of the people who tell you news trading is gambling, or risky have no idea what they are talking about. Many people are not order flow traders, have never placed order flow trades, let alone successful news trades. They have never fully comprehended the reasons why the market moves based on news, and the market participants thinking involved in the market.
They don’t want to take it to the next level of order flow trading. They don’t want to learn more, they don’t want to learn how to find new inefficiencies and place high probability trades. These are the people who think you can trade the market and news with trendlines, bollinger bands, etc. In my experience, I was never able to trade the news successfully using any technical indicators or price action. I had to think about the information that did not exist on the chart. I had to get into the mind of the market participants behind the order flow. There was no other way.
Remember this important equation:
Order Flow Trading > Price Action Trading > Technical Indicator Trading
This is true because order flow and liquidity are the first things that cause the market to move. They are the first things that must occur in order for the market to move. Once order flow is generated and sufficient liquidity is consumed to move the price, then, and only then does that show up in the price action. Then once the price action moves sufficiently, do the technical indicators like moving averages, macd start crossing and firing off their signals.
Price patterns and chart patterns don’t cause anything to happen. In order for the price and chart patterns to fire off, there needs to be order flow generated first. Then the price and chart patterns form. Then after they form, in order for the trade to succeed, you need further order flow to come in to move the market in your favor. If the order flow isn’t generated, then the trade becomes a loser, no matter what your technical indicators or chart patterns say. The strength of the trade does not hinge on how “perfect” a technical indicator setup, chart pattern or price pattern may be. The strength of the trade depends on how much massive order flow gets generated. Perfection only comes from analyzing and interpreting correctly the information that does not appear on the chart.
Now you may say well what if you wait a little bit after the news and wait for a price action setup. Lets say a huge bullish candlestick forms that engulfs many of the previous bars after the news. You can use that as a signal to go long, right? Well if you are a price action trader, sure you can. But just know that by the time the price action signal forms, all the order flow from the news may have already been generated and price reached it’s fundamental value and will not move further. By just studying the chart, you would never be able to find that out.
Order flow and liquidity are the first things that happen in order for the market to move. So it stands to reason that the maximum profit exists when you become an order flow trader and understand how liquidity works, since it is the foundation of every market.
Following the trading profit ladder, you don’t want to settle for breaking even, or a small profit using technical indicators and price action. You don’t want a large consecutive series of losing trades. You want to shoot for good profits, huge profits, and an edge in each and every trade that you place. Anything else is a road to mediocrity. A very painful road to mediocrity.
Many of the people who claim you can’t trade the news are still trapped in the technical indicator, chart and price action trader cycles. They don’t want to take their trading to the next level because they may think such a new level doesn’t exist, or that it is too hard to learn, or too fancy pants for them. Others are just flat out lazy and looking for the easy button, the forex robot that will make them a millionaire. I haven’t heard of too many forex robot millionaires. Although I have heard of many global macro millionaires.
Therefore if you want to learn news trading, stay away from the people telling you that it can’t be done. For they have not yet developed the order flow mindset and flexibility necessary to succeed at it. They have not yet opened their eyes to the intraday inefficiencies.
For news trading the right way, is one of the most lucrative ways for small trading accounts to turn into bigger ones. Do it the wrong way and you can take losses very quickly.