Focus on the Charts NOT the News

Focus on the Charts NOT the News

Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.” -Alan Farley

All the would be Geo-political scientist from this weekend can stop trying to anticipate where price goes with this Ukraine situation and just follow price action from here. It is not the news but the reaction to the news that makes all the difference, it doesn’t matter what happens what matters is how traders react to what is happening.

The way it currently looks with the unknown risks with the Russia/Ukraine situation there is a very high probability that risk off will begin until there is some stability in the Ukraine. Traders respond to uncertainty with volatility. The fear is in an escalation of the situation to the United States and Great Britain due to a 1994 disarmament treaty that was signed guaranteeing border protection if they gave up their nuclear weapons. Here is the thing we all have to remember here, do not attempt to trade the news, trade the price action as it unfolds. If there is a sudden resolution to the conflict then the market could soar, if it escalates to an unthinkable stand off or even a major war then the market could plunge, if the uncertainty continues in this situation then the volatility could grow and position sizes will have to be decreased. An open mind to possible future price action is a profitable mindset for a trader to have. But the chart always knows,charts as a whole is a source of collective wisdom that almost always positions itself  correctly BEFORE a major move. Follow that collective wisdom, things that are coming are seen a mile off and there is usually plenty of warnings if a trader looks closely enough at price action.

It is not the news that a trader should be trading but a quantified trading system with entries and exits that are shown to have an edge. If you find yourself looking to the news or  others for ‘advice’ then it is time to understand what a trading system is first then create one for yourself.

Anything can happen and no one has a crystal ball or a time machine so they do not know, ignore the talking heads and trade the trend, the price action, support and resistance and the facts.