Profitable Trading - Part 5 of 5
Jun 8th, 2008 by Erv
If you are going to be a profitable trader, you have to ignore the news. Very few successful traders or investors watch any news shows during the day. If you want to watch these shows, watch them in the evening, but when the markets are open, the commentary you find on these shows will more often than not just confuse you, frighten you, or mislead you. This results in emotional trading, which virtually guarantees losses.
Remember, news does not dictate the major trends in any market or security. Rather, news flows from the trends! For instance, how often has a stock reported better-than-expected earnings, and its share price tanks? Or it announces worse-than-expected earnings, like Citibank did recently, and the share price soars?
The same holds true when economic stats are released by Washington like unemployment numbers, CPI, trade deficit numbers, you name it — they are all backward-looking statistics and do not create or change trends. Rather, the statistics are the result of trends already in motion, and if you follow them, or rely on them to trade, as I said previously, you are virtually guaranteed to lose money.
The bottom line is that you have to rely on your own homework on the markets, whether it’s based on fundamental or technical analysis. Develop a set of trading rules and follow them. Never bet too much on any trade, cut your losses and let your profits run. Do all these things and you WILL be a profitable trader.
