“News creates opinions whereas price is fact.” --- Sam Evans

Hello:

The supreme goal of any trading activity on the markets is to achieve profit. Therefore it’s natural to use any technique or information that might help us achieve that goal. You know an old debate: Whether technical analysis or fundamental analysis is a better method. None of the two is perfect. There are benefits and drawbacks for each. For example, a good knowledge of fundamental analysis often makes it possible to better understand current price developments and the reasons behind them, but timing is always a problem (especially long-term effects of economic developments). When it comes to timing, technical analysis is by far superior, whereas it finds it difficult to identify causes and reasons.

There are traders who combine both forms of analyses for trading decisions; other traders choose either of the two. Matt Carniol is a great and diligent mind that likes to know reasons for price movements, and with this kind of approach, he’s successful. I can guarantee that Matt has good trading ideas. He’s such a nice and pleasant person (I got to know him by reading his articles), and it’s surely worth investing your time listening to what he has to say. Dr. Alexander Elder isn’t a fundamental analyst. His trading decisions are chart-based, yet he’s a hugely successful trader. Here’s what he says concerning this issue, “You know some people ask me about fundamental analysis. I don’t do it. I don’t understand it. It’s my weakness. I’m not proud of it. But I’m aware of my weakness. If a fundamental question comes up. I have to find somebody to answer it for me. I cannot answer it myself.”

Inflation is an economic nuisance. We know. For weeks now, worrisome news items are coming out of the US. We know. When times are hard, people would be forced to live on less. We know. But can these topics be of any benefit to a trader if his account is going down? How can you profit from those news headlines? If Japanese Prime Minister declared himself a devoted Moslem, the market might rise by 500 pips. Supposed Peru developed nuclear bombs, the market might fall by 800 pips.

I used to take news seriously. I have discovered that the more you gain better trading experience, the more you’d appreciate technical analysis. I still like to know major economic developments, but I place my trades based on what I see, with predetermined rules of how I’m going to deal with any occurrence that happens afterwards. Now if I see a good trade setup on AUDUSD on my chart, I’ll simply enter without giving too much thought to the fundamental reasons behind that. In the end, those who survive the markets are those who follow the time-tested tips and tricks for successful trading.

I hereby conclude with the quote below:

‘The lesson here is that prudent traders should not become overly sensitive or reactive to most of the day-to-day fundamental news events that are reported to be moving the market on a given day. What is important for the trader is that he or she recognizes and understands the overall trend of the market, and that daily market ‘noise’ is usually an insignificant part of the overall process of trading and of market behavior, itself.” --- Jim Wyckoff