subject: When The Newscasters Are Screeching Hysteria, How Do You Trade E-minis? [print this page] Its not unusual for one of my students to come to the e-mini trade room after watching one of the financial channel broadcasts in a hysterical state. He or she may have heard a newscast that the market is going to surge and are determined to get long at the opening. I usually listen impassively, then trade the opportunities my chart offers.
My father once told me, things are never as good as they seem to be, nor are they as bad as you think they are. Its great advice. The sky has never fallen, and our streets are not paved with gold. No, our plight lies somewhere between those two extreme opinions. That being said, why does the media hype mundane events into catastrophic proportions? I am not an expert on media hype, so I cannot answer that question with expert authority; but I suspect that sensationalism sells magazines and draws people to watch television so the networks can sell commercial time. That is just my opinion, however.
I do know that the media plays no part in my approach to trading e-mini contracts. As a scalper, I do not particularly care if the market is moving up or down. Further, I dont care if a retired hedge fund manager or financial expert makes dire predictions about the state of the economy or how the market is going to move on a given day.
As a trader, you need to be able to sort through the hype and drill down to the factual basis of what is occurring in the markets. As traders, we all receive essentially the same data feeds, the same economic announcements, and watch similar charts. Granted, it takes some skill and practice to read charts; but once you gain that experience, you hardly need the director of a mutual fund to tell you what the numbers mean. If the unemployment numbers are unusually high, its a safe bet that the economy has shed some jobs, and if the unemployment claims stay high for a long period of time, the unemployment rate is rising. Pretty simple.
Does this sound too arrogant? Its not meant to sound arrogant; you will find that charts will tell you everything you need to know. If the market is going to fall, you will see it start to fall and plan an appropriate short entry.
This does not mean, however, that you should ignore the daily economic releases from the government and government agencies. These institutions provide valuable and accurate information that is essential for trading. What you dont need is the endless discussion of what these numbers mean. The chart will tell you what the numbers mean and how the traders are interpreting the data.
In the end, its the prices on the chart that matter, and its the prices on the chart that tell the story of the economic news. Not the talking heads on the financial news networks. Your job as a trader is being aware of economic news and analyze that news and the price action as you observe and analyze your trading chart.
