Most trading gurus tell you to ignore the fundamentals and focus only on the technicals. Almost every trading book you pick up is filled with technical patterns, indicator glossaries and a multitude of strategies based on the combination of both.
Most retails traders can expound on differences between MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index) , but would be stumped by the meaning of PMI reports or the IFO survey.
I understand fundamentals are hard. They are confusing and often contradictory. In the inimitable words of Yogi Berra “It’s tough to make predictions, especially about the future” – and especially if those predictions involve some long term view on the economy, which can change faster than the weather in Florida.
Fundamentals are fickle. They require context, which often only becomes obvious after the fact. And they certainly appear less objective than a couple of trend lines on a chart.
But here is what I don’t understand, I don’t understand retail traders (most specifically day traders) who tell me with a straight face. “I don’t care about news.”
Those have to be the five ridiculous words that I hear every single day.
What do you think moves the price? Only two things price itself and News. So if you’re just watching the price and not following the news you are like a half blind man competing against thousands of traders with eagle eye vision. Is there any wonder why 90% of retail traders lose money? Without any awareness of the news retail traders are simply fodder for the market. They are the quintessence of “dumb money”.
I can’t tell you how many times I’ve seen retail traders lay down a bet on some cross like EUR/NZD because “it looked good on a chart”, 3 minutes before an RBNZ (Reserve Bank of New Zealand) announcement or an employment report only to see their money evaporate before their eyes.
In fact, 90% of all retail traders would be much better off if they knew NOTHING about technical indicators, but knew the weekly G-20 economic calendar COLD.
In our chat room, we never day trade fundamentally, but we know every single economic event and we listen to a streaming Squawk Box from London 24 hours each day, because we know that the key to success in day trading, does not lie in trying to figure out the meaning of a squiggle on the chart, but in making sure that you are aligned with the price flow after the news hits the screen.
The best advice I can give you is while investing pay attention to the news not just the charts to give your self an extra edge on retail traders.
Until next time,
Mr. Schlossberg is the managing partner at BKForex and creator of the new course The ULTIMATE Forex Trading Course produced in conjunction with Weiss Educational Services. He is also a weekly contributor to CNBC’s Squawk Box and a regular commentator for CNBC Asia and CNBC Europe. His daily currency research is quoted by Reuters, Dow Jones, Bloomberg and Agence France Presse newswires and appears in numerous business publications and newspapers worldwide. Mr. Schlossberg has written articles on trading for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley. Boris’ extensive experience in trading and developing momentum based techniques provide the foundation for BKForex strategies.