All Fundamentals and News Information Useless?

Here is a question you can ponder, especially for those skeptical of news trading, global macro, or some sort of fundamental analysis. Why is there this whole infrastructure surrounding disseminating and publishing information about the financial markets, economies, securities, etc? You have Bloomberg, Reuters, CNBC, Wall Street Journal, and countless other news sources out there.

Then you have the analysts come on to do interviews and give their views on various topics. You have many trading magazines that almost always include some information or articles about global macro, economies, fundamentals, etc. In the latest issue of Currency Trader Magazine they have articles on the Swiss National Bank, Gold fundamentals, and AUD/CAD fundamentals.

All this information available around the world, is it all useless?

After all, there are many traders that just like to trade with strictly technical indicators, chart patterns, price patterns, etc without any knowledge whatsoever of what is going on outside of the chart. Some of these traders dislike any sort of fundamental analysis, and even call it “funny mentals.”

If fundamentals, or global macro is so useless as they tell you, then why are there multi billion dollar companies out there providing all this information to people? According to many pure technical traders the fundamentals or news, or global macro is useless as they believe everything you need is found in the chart. If that is the case, then there are these billion dollar business providing all this information around the world to hedge funds, investors, etc and it is all useless. That is what the pure technical analyst will have you believe.

Not all technical analysts believe that. Some of them take the position that the news and global macro can be useful, but they don’t want to put in the time and effort to figure it out. They just found a system and trade it. Nothing wrong with other trading systems. They say you should find a trading strategy that fits your personality. Just make sure that the trading strategy you choose has an edge.

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Once you acknowledge that the news and fundamentals can be useful, you need to start developing a mindset and way of sorting the information. I don’t really use too much fundamental analysis. I do use the concept of fundamental value. But the way I apply it to trading is not just purely through fundamental analysis. I never want to focus purely on fundamental analysis. I always want to combine the changes in fundamental value with order flow principles and strategies. I want to think about changes in fundamental value through the mindset of order flow and liquidity. I want to think about more global macro analysis. I want to think about how stops, option barriers and news trading can be incorporated all together to form the super order flow system.

Different traders at different stages have different problems.

One trader doesn’t acknowledge that fundamentals and news is useful.

Another trader acknowledges that fundamentals and news can be useful, but doesn’t want to put in the work to develop the mindset and figure it out. They suffer from information overload.

Another trader acknowledges that they can be useful, starts putting in the effort, but gets stuck and does not understand the critical mindset and order flow thinking and strategies necessary in order to assimilate the information and put it together in a profitable way. And these traders attempt to solve the problem by going on forums or reading trading books. Truth is, I have never read a trading book yet that talks about global macro and news trading in the way that I view and trade the market. Most books do not view the market through a order flow mindset.

The trading forums are no better. If you post a question you will probably get a response from traders still stuck in the technical indicator and price action trader cycle that news trading is bad, or the fundamentals don’t matter, or everything is reflected in the price, etc. Nothing wrong with those traders. They have their own way of viewing the market, their own trading systems, some of which may have an edge, others which may only have a perceived edge. They can be good people. But always remember that those traders have not taken trading to the next level. They have not taken trading to that of an order flow mindset, or news trading mindset, or global macro mindset, or liquidity mindset.

I am not saying that all fundamental, or all news information is useful – they aren’t. The trading epiphanies and progress occurs when you realize that not all the fundamental or news information is important. The progress occurs when you realize that only a 5% – 20% of all the information out there is useful at any given moment.

Remember one of the best trading quotes of all time:

Not everyone is going to interpret things in the same way, at the same time, as you do, and it’s important that you understand that.

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Transform your trading with Order Flow Mastery. Click Here.

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All Fundamentals and News Information Useless?, 5.0 out of 5 based on 5 ratings

2 Responses to All Fundamentals and News Information Useless?

BeachBummer July 17, 2012

Grkfx, Would it be accurate for me to say that, from out point of view as OF traders, tech analysis is exactly the same as news/fundamental/global macro analysis? My thoughts are that the only differnence between all types of analysis is the amount of traders and $ that follow each technique. An OF trader is trying to figure out what other market participants are thinking and how they will react. The market is, after all, simply a collection of traders' beliefs on what price will do based upon whatever analysis they choose. So, let's say for example, that all major hedge funds decide to abandon all other types of analysis and focus soley on tech. Then we as OF traders would focus on tech mostly as well. Of course this is not the case, and since technical retail traders have very little market moving power in most cases, I choose not to perform very much OF analysis in that area. But, I find it helpful to view all types of analysis in this way, it helps me focus on being an order flow trader.

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Grkfx July 17, 2012

BeachBummer you are spot on! As an order flow trader I focus on what I believe the market participants who can move the market are focusing on. That is my core and foundational belief as an order flow trader. If the market participants can potentially generate aggressive orders as a result of "x", whatever that "x" may be, then I focus on that. We all trade our beliefs about the market. As you said it is very helpful to view the type of analysis in the way that you said. You focus on what can generate aggressive orders to move the price as perceived by the other market participants. Therefore when I say to focus on news/fund/sentiment/macro, the only reason I say that is because the big market players tend to focus on that in order to execute big transactions to move the market. There are some occasions or days where that may not be the case, so I have other tools at my disposal like stop hunts, barriers, etc to help me on those days. If at some point in the future I came to the conclusion that the big market players placed aggressive orders based on a moving average crossover, or stochastic, or astrology, or anything else, then I would absolutely have to focus on that. That is what it means to be an order flow trader. You shift your sensitivity level to what the other market participants are focusing on. Now I don't believe in moving average crossovers, stochastics, astrology. I don't believe they generate much order flow. Even if they do, it needs to be aggressive enough to move the price, and it needs to be identifiable enough to be able to put it into a system. There may be some person out there placing a $10 million dollar order in the EUR/USD due to some moving average crossover. That trader may even be aggressive and issue a $10 mil market order. But even if you could of identified where they executed the order, it is meaningless because such a small order is not going to move price. Even if it did move price, such a trader needs other traders to move the price so they can profit as well. Those traders that may come after that $10 mil order, may not be placing orders based on a moving average crossover. It is possible that there are some financial instruments out there that are sensitive to "key" moving average levels such as the 200 period moving average, etc. And if you can identify such situations and profit from them, then I am happy for you. However, the very best trades in history had absolutely nothing to do with moving averages, nor did they have anything to do with chart patterns, nor any solely price derived indicator. They had everything to do with the information flow. I shift my sensitivity level to what I believe the market is focusing on. However, that shifting of sensitivity does not occur between radically different indicators like moving averages, stochastics, RSI, astrology, etc. Rather my sensitivity level shifts within the news, fund, sent, and macro forces and everything I believe will generate order flow. Once you get into global macro analysis, there are all sorts of reasons why traders can place the trades they do.

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All Fundamentals and News Information Useless?

2 Responses to All Fundamentals and News Information Useless?

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