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 accelerates losses, focus is on 1.1800
EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.
GBP/USD turns negative near 1.3540
GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.
USD/JPY holds gains near 154.00 ahead of the Fed’s minutes
USD/JPY retraces Tuesday's losses and returns near weekly highs in the area of 154.00. The US Dollar trims losses in quiet markets with all eyes on the Fed's minutes. Weak Japanese GDP data resurfaced concerns about Japan's fiscal stability and halted JPY's recovery.
Editors’ Picks
EUR/USD accelerates losses, focus is on 1.1800
EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.
GBP/USD turns negative near 1.3540
GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.
Gold picks pace, flirts with $5,000
Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.
Fed Minutes to shed light on January hold decision amid hawkish rate outlook
The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.
Mixed UK inflation data no gamechanger for the Bank of England
Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.
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