All You Need... is a Chart

[firewalker]

"It is practically impossible for any man or organization to absorb, analyze and digest the many so-called fundamental factors which influence the course of the stock market, and deduce therefrom a conclusion from which the course of prices may be predicted with any fair percentage of success; what is more, it is a fallacy to believe this can be done on that basis. All the elements which have gone to produce the lines on the fundamental charts have already been discounted in the market. "- R.W.

[firewalker]

The problem with news-related trading is that most traders focus on picking trades around these releases because they believe the sudden increase in volatility gives them a better chance of making a quick buck. Unfortunately, they often fail to realize the risk that goes along with it. Too many traders see a sudden burst in price and think "this is it", and they jump in.

The patient trader waits and watches how price reacts, and looks to fade the news. This is not to say that fading the news is a profitable strategy in each occasion. One must look to what price is doing with regard to important technical levels, like support and resistance.

Most of the news has already been factored into the current price of the market. This means that once the news confirms what the market was expecting, the whole anticipation is gone and people take their profits and walk away, thus sending the market lower.

There's one very important observation to be made here. f the market should go lower (very bad news), but it doesn't, it signals important strength. The news in itself doesn't matter, but it's the aggregate position of traders before the news. Experienced traders wait to see what the news tells them before acting.

Often a market will run up minutes or hours before a report, if they are expecting good news. That's why by the time the report is released, price can often fall out of nowhere. This is especially the case when the news confirms what is expected or the numbers are the same as forecasted.

(main sources: Marcel Link, Justin Mamis, John Magee, and my own personal experiences)

[firewalker]

"Many times unexpected news may come out that is the opposite of what the market has been doing. Initially the response is rapid, hard move the other way, but once traders take a deep breath and reevaluate, the market normally will continue in its set trend. I can't count how many times a downtrending stock reports better than expected earnings, has a quick bounce, and then spirals back downward.

The news isn't important here; it is more important to see how the market reacts to it after the initial move. Fundamentals should be believed only as long as the technical signals agree. Too many times a trader will stick with a news story and not let go no matter what the market ends up doing. Opinions mean nothing to the market; the market goes where it wants to, not where you think it should go. If the market shakes off news and continues its trend, a trader should ignore the news and follow the market." - Marcel Link

[firewalker]

	Quote:	wasp
	"A large problem with news releases is the figure is never the whole picture. For an intraday currency trader, I for one do not pay attention to numbers when released because the figure itself is only part of the picture. Many newbies believe if it is X = long and Y = short but it is never that black and white. How can a home retail trader know the real story and act accordingly. Would a retail trader ever get the release in time in comparison. Obviously the news affects the price and 99% of the time the end reaction can be foretold to a high degree through technical analysis so from both points of view, for the retail trader, it is better to work purely from the chart IMO."

	Quote:	chump
	I buy Company X as at Y date on the close. The next day the stock goes X dividend and price drops by the requisite amount. The information was not in the chart that it would do that ,it was in knowing that the company was going ex div the next day and you could expect the price to drop.Ergo ,all you needed was not in the chart.

..............

[mister ed]

Welcome Firewalker - interesting stuff!

[brownsfan019]

fire - good stuff, but that's a lot to read in one sitting.

Give us some breathing time, ok?

[brownsfan019]

But to answer your question - I voted no from a pure daytrading standpoint. As far as the day-to-day moves are concerned, I only want to see the chart. It's cliche, but I agree w/ the statement that the chart tells you everything you need to know.

Now, on a longer term perspective, which I will define as investing, I do consider fundies. I do not believe there is a 'long term trader'. I think by definition a trader is one that actively trades. Once you call yourself a long term trader, I believe that is synonymous with a trade gone wrong and now you have turned into an investor.

[firewalker]

	Quote:	brownsfan019
	fire - good stuff, but that's a lot to read in one sitting. Give us some breathing time, ok?

I realize that, but I just wanted to put together the series of posts I made elsewhere, so that the basics are there. I'll leave it like this for a while, it's definitely a lot of text.

[Sledge]

Great thread Firewalker. I agree with you 100%
I actually only use the news to see if it will push an instrument to a Support or Resistance level. That tends to be the case most of the time on a major news release.

Scenario usually plays out like this: Push to a resistance level, trap the would be bears, then "horn" them as it climbs back northward!

Kudos on starting the thread!
Sledge

[fifty2aces]

FW - glad to see you here, it's unfortunate that T2W is getting "noisier", but I always enjoyed your posts there, and look forward to seeing more over here.

I do follow fundamentals, although only for 2 reasons:

1) I find them interesting, so it makes for some good reading after the close

2) To ensure there are no major economic releases that I need to watch for - example would be NFP or interest rate announcements - while I don't use them to make trading decisions, it's good to know not to put on a trade with a tight stop just before a load of volatility.