This member had a great question regarding analysts and news articles reporting their reasons for market movements.
Question summarized below:
Question: I am on the section talking about News Information sources and daily reading the news to find out why price moved the way it did for the day (as explained by news on sites such as Bloomberg). Just curious…have you read Beat the Forex Dealer …. Chapter 20, FX Analysts: Who Cares? What are your thoughts on this?
I’m asking because Silvani the author clearly rips analysts and their reasons given in articles for why price moved that day (especially when they give reasons based on fundamental news).
Let me know what you think, if you would. I’m curious to know your insights on this. I read a lot of blogs and such that will say things like “EUR/USD moved higher today on …..(this, insert a fundamental reason)…..and USD/JPY moved down on (this)”.
So I am very leery of these analysts and writers on Bloomberg and wherever giving their reasons and opinions on market movement using fundamentals as that “reason” when it is probably something completely different to what the analyst is describing.
I have not read the book Beat the Forex Dealer. The reason is that I took a look at it, and he seemed to focus a lot on brokers and stop hunting and these dealer tricks, etc. And from all my trading and all my research of the top traders, I have never seen them complain about any of these things. There are some dealer tricks that go on and stop hunting that occurs, and I have covered all the important elements in the stop hunting section of the course. However, beyond that, I felt that it was more proper to focus on the global macro reasons for the markets’ movements. I believed that will serve me far better. I am actually a much happier person with it.
I don’t want to get back into that vicious cycle where I keep blaming other people. Blame the brokers, blame the dealers, blame the stop hunters, blame the analysts, etc. I have been there and it didn’t really feel very good blaming other people and having so much dislike for other people.
I got out of that process by just ignoring the information that I deemed not relevant, then focusing my mind on the information and principles that I believed are relevant. That is why I would much prefer to read a book such as The Alchemy of Finance, or Hedge Fund Market Wizards, or Reminiscences again, or a Soros biography, rather than that book.
As for the analysts you are reading. Not all analysts know what they are talking about. I read plenty of information flow, squawk flow, articles, etc during the day that I believe are B.S. for explanations. When I read such a thing, I don’t get angry at them. I just “x” out the box and close the information, then go search for the more proper information that can describe the markets’ movements.
Here is the way I think about things. I don’t usually read analyst blogs, etc. What I am more looking for are reporters. I want people to report the facts. To report on underlying conditions, or as close to them as possible. That is the first thing I am looking for. Now, in the global game of trading, where there is so much money flowing, if a financial instrument makes a big move, then the reporter may have to go out and get some opinions as to why the market moved. It is their job. If they do a decent job, then they get the views of a few different people.
I like Bloomberg articles, but I also read Reuters and some FT, sometimes some WSJ. Even Bloomberg has started to have some B.S. articles lately. I just try to ignore the articles that I find not relevant. I am just really interested in them describing the current moment. What happened today. Then I can use my own scenario analysis skills to project out future scenarios from the current moment. If the article is well written, then it can also provide some global macro reasons and describe the economic impact of the policies, so you also learn a bit of economics in the process.
You have to understand that you have to get information from somewhere. Once you make the decision to spend a lot more time on the information that exist outside of the charts, then you need to find which sources of information you will plug yourself into. All the top discretionary traders plug themselves into the information flow. Some of them use news feeds, squawk boxes, articles. Other people get on the telephone and chat with other people. Back in the days they used a lot of newspapers. I remember Louis Moore Bacon in the early 1990’s had a copy of Barron’s flown over to him during the weekend so he can plug himself into the information flow.
You just have to find a way to plug yourself into the information flow in a format that you can trust. I use some IFR for stops and barriers and to provide me a news feed. I use some Bloomberg, Reuters, and FT articles for end of day or middle of the day research. Other than that, I have my order flow generator / scenarios sheets handy, which already contain what I believe generates order flow. So sometimes it is just a matter of matching up what happened during the day to my scenario sheets. Back in the days, I did that on an end of day basis. When you get good at it, you can do it in real time. I have searching for the 1-5 key reasons and elements for why the market should move. You don’t have to know everything.
That is what I believe the top traders mean when they are talking about “intuition” and “tape reading”, etc. I can read the tape. I can get a feel for where the bias is. I do stare at prices fluctuating up and down sometimes. But I am not going to sit there reading a DoM / Level 2 screen, or time and sales. Instead as I am watching the price tick up and down, I am playing out scenarios in my head. I am playing out the battle of the bullish and bearish scenarios in my head. I am going over the global macro forces trying to figure out which side is going to win and if it is worth placing a trade. I did that today in the EUR/USD and EUR/JPY as I was playing out the scenarios when it was stuck in a tight range before it broke out. I felt the bullish macro reasons would win and I placed long trades in the congestion. I caught the up moves.
But I wasn’t going to delude myself into “tape reading” with technical indicators or some DoM / Level 2 / time and sales. I would call it tape reading based on expectations, sentiment, positioning, scenarios, global macro, etc. That is the far better form of analysis in my opinion. There is a big difference. You can control what you are thinking about in your own mind!
I think as you go through the course further into the news trading section and the market sensitivity lessons, you will understand more what I mean.
Sometimes a news article nails why the market moved during the day. For example let’s say the market is up 100 pips and I read an article and the author nails the reasons why. I am then going to project out future scenarios to determine whether I should go with the move, fade the move, or do nothing. That is what trading is all about. Trading is a series of days, where you interpret information and market movements to determine whether you should “go with the move”, “fade the move”, or do nothing.
Sometimes the reasons don’t always have to do with the articles on fundamental/macro reasons. Sometimes the reasons have to do with a particular form of stops being tripped what I call the sent/psychological shift, etc.
Bottom line is that you want to be plugged into the information flow. Play out scenarios from the current moment. Get good at scenario analysis. Most of the trading profits don’t really come from having access to “insider information” or having an insider edge. Most of the trading profits come from having an interpretation advantage. To have a clearer insight into anticipating the near future moments in time. There are some top traders that have an information advantage. But most of the greatest trades in history were placed using publicly available information. You just need to interpret the information properly and do proper scenario analysis.
I hope I gave you the insights you were looking for. I hope the future lessons in the mastery course will give you further insights to help you break free from any limiting beliefs so you can go faster!