I don’t know why the floodgates have opened, but I read some really ridiculous “stock market news” this past week:
- The stock market is about to have an epic rally!
- Bitcoin is ready to fly!
- An emergency Fed meeting is scheduled today, this should be uber-bullish!
Guess what? None of these statements were true. Shocking, I know.
I also came across some amateur technical analysis by someone who wouldn’t know if a chart was upside down or not.
A new and/or naive trader probably lost money based on these predictions and poor analysis. Unfortunately, the amount of bad information out there is growing due to desperation? AI? Bots? I don’t know.
How to separate bad “stock market news” from good
As traders and investors, we find ourselves constantly immersed in the market action, looking for any clues that may give us an edge to make a winning trade. It could be a flash news item that suddenly shifts the power from the bulls to the bears or vice versa. Perhaps it is a new trade idea that you hear on CNBC – and it’s suddenly the hottest thing around.
It doesn’t matter where you hear a tidbit of information – verify the source.
Is it a long-time trader with a stellar track record? Or is their Instagram account only two months old, yet they have 850,000 followers?
Sure that Instagram account could belong to a hedge fund manager who only just joined the network. But be skeptical. Listening to others’ ideas can lead you to good trades and investments, but not always.
When in doubt, take that idea and compare it to what you’re seeing on the charts. Are price and volume aligned? What are momentum and sentiment indicators telling you?
In the end, it is really about making a judgment call. While it is hard to separate bad stock market news from good, a firm risk management plan that says, “Verify first, act second” can save you a lot of heartache.
