Sam Seiden
Independent Analyst
So often I get this question: “Should you not trade when big news is coming out”? My answer is always the same. If you don’t know how to identify strong demand and supply in a market by looking at a price chart, don’t risk your hard-earned money in a trade and stay out of the market. However, if you do know what you’re doing, trading around news is great! Like any market, the global financial markets are nothing more than an ongoing supply and demand equation. Trading and investing opportunity is present when this simple and straight forward equation is out of balance.
Let’s now add news to this simple and straight forward equation… News creates perceptions and perceptions create action. In the markets, that leads to one of two things, a buy or a sell decision. So, understand that any and all influences on price are always reflected in price. If you are following me, you can then conclude that news, no matter how strong it is, simply speeds up the price action (movement) that was going to happen anyway based on supply and demand. Let’s look at a recent strong news event, the November 8th election, and watch how price moved in a market we cover on our Supply and Demand grid.
November 8th, 2016 – Election Day – Russel 2000 (TF) Futures – OTA Supply/Demand Grid
November 8th started with most people around the world assuming Hillary had an easy path to victory. As the day and evening went on, voting showed that it was a tight race and things were changing. Later in the evening, Trump’s predictions of a win were becoming more and more clear. Because of this “unexpected outcome”, the global equity index markets began to fall and fall hard, many people were selling. Our supply and demand grid told us this was going to happen as well. Price rallied to supply and then began to collapse as demand was far below.
November 8th, 2016 – Election Day – Russel 2000 (TF) Futures – OTA Supply/Demand Grid
Price declined all the way down to a key demand level we had on our supply and demand grid for the same market. This was also shortly after the election results became final. Price then rocketed off that demand and rallied to new highs as again, there was no supply to stop it. If you were just trading the markets key supply and demand levels November 8th and had no idea there was even an election going on, you would have taken these same trades. News, again, just sped up what was going to happen anyway. You can think back decades to all the major news events and look at your charts and you will see this is the case time and time again.
Our supply and demand grid didn’t know there was an election. It doesn’t care about Hillary or Trump. Our supply and demand grid doesn’t have a brain. It ONLY focuses on where the Banks and financial institutions are buying and selling, where the market’s significant supply and demand is. It doesn’t know news is happening, or care; that’s one of the reasons it performs so well. When risking your hard-earned capital in the markets, focus on what is real, not what you feel.
Hope this was helpful, have a great day.
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Editors’ Picks
EUR/USD holds around 1.1750 after weak German and EU PMI data
EUR/USD maintains its range trade at around 1.1750 in European trading on Tuesday. Weaker-than-expected December PMI data from Germany and the Eurozone make it difficult for the Euro to find demand, while investors refrain from taking large USD positions ahead of key employment data.
GBP/USD climbs above 1.3400 after upbeat UK PMI data
GBP/USD gains traction and trades in positive territory above 1.3400 on Tuesday as the British Pound benefits from upbeat PMI data. Later in the day, crucial data releases from the US, including Nonfarm Payrolls, Retail Sales and PMI, could trigger the next big action in the pair.
Japanese Yen seems poised to appreciate further; awaits BoJ decision on Friday
The Japanese Yen maintains its bid tone through the first half of the European session on Tuesday which, along with a bearish US Dollar, keeps the USD/JPY pair depressed below the 155.00 psychological mark. The growing acceptance that the Bank of Japan will raise interest rates this week turns out to be a key factor behind the safe-haven JPY's outperformance.
Editors’ Picks
EUR/USD holds around 1.1750 after weak German and EU PMI data
EUR/USD maintains its range trade at around 1.1750 in European trading on Tuesday. Weaker-than-expected December PMI data from Germany and the Eurozone make it difficult for the Euro to find demand, while investors refrain from taking large USD positions ahead of key employment data.
GBP/USD climbs above 1.3400 after upbeat UK PMI data
GBP/USD gains traction and trades in positive territory above 1.3400 on Tuesday as the British Pound benefits from upbeat PMI data. Later in the day, crucial data releases from the US, including Nonfarm Payrolls, Retail Sales and PMI, could trigger the next big action in the pair.
Gold retreats from seven week highs on profit-taking; all eyes on US NFP release
Gold price loses momentum below $4,300 during the early European trading hours on Tuesday, pressured by some profit-taking and weak long liquidation from the shorter-term futures traders. Furthermore, optimism around Ukraine peace talks could weigh on the safe-haven asset like Gold.
US Nonfarm Payrolls expected to point to cooling labor market in November
The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls (NFP) data for October and November on Tuesday at 13:30 GMT. Economists expect Nonfarm Payrolls to rise by 40,000 in November. The Unemployment Rate is likely to remain unchanged at 4.4% during the same period.
NFP preview: Complex data release will determine if Fed was right to cut rates
The long wait is over, and the Bureau of Labor Statistics in the US will release nonfarm payrolls reports for both November and October at 1330 GMT on Tuesday. The overall NFP figure for October is expected to be -10k, however, it is expected to be influenced by a massive 130k drop in federal department workers.
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