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 rises to near 1.0450 due to rising odds of Fed keeping rates unchanged in January
EUR/USD remains steady following the gains from the previous session, trading around 1.0430 during the Asian hours on Monday. This upside of the pair could be attributed to the decline in the US Dollar following the Personal Consumption Expenditures Price Index data from the United States.
GBP/USD consolidates in a range around 1.2570 area; upside potential seems limited
The GBP/USD pair kicks off the new week on a subdued note and oscillates in a narrow trading range above mid-1.2500s during the Asian session. Moreover, the fundamental backdrop warrants caution before positioning for an extension of Friday's bounce from the 1.2475 area, or the lowest level since May.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Editors’ Picks
AUD/USD appreciates as US Dollar remains subdued after a softer inflation report
The Australian Dollar steadies following two days of gains on Monday as the US Dollar remains subdued following the Personal Consumption Expenditures Price Index data from the United States released on Friday.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold downside bias remains intact while below $2,645
Gold price is looking to extend its recovery from monthly lows into a third day on Monday as buyers hold their grip above the $2,600 mark. However, the further upside appears elusive amid a broad US Dollar bounce and a pause in the decline of US Treasury bond yields.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
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