As a trader, how much should the news dictate your trading? During times of global turmoil and anxiousness, many traders and investors make decisions based on headlines. But that’s only part of the story. For a full picture of what’s happening, you also need the wisdom found in the charts.
For the past two years, we have been glued to the news. Most of that time has been focused on the COVID-19 pandemic. Recently, it’s been the war in Ukraine and rampant inflation in the economy. If you think about your own trading during this time, there is no doubt you have made financial decisions based based on how well these issues were going. Without knowing the outcome, it was all you could do. Or was it?
Don’t let the news dictate your trading
Let’s take a look at the market action over the past two years and how the technicals helped traders make smart decisions.
In March 2020, the stock market and global economy were in tatters and the pandemic dominated the news. Investors and traders wanted no part in the massive uncertainty and anxiety, and they bailed on the markets.
As spring progressed, things began to change. If you studied the charts, you could see evidence of a clearing; you just needed to be patient and wait for confirmation. Once the Fed announced drastic measures to support markets and the economy, indicators began flashing buy signals and money flow returned in a hurry.
The SPX 500 recently peaked at 4,800 – more than 128% higher than the lows ticked in March 2020. That is a stunning return over a two year stretch.
And this brings me to my point: If you paid more attention to the dour headlines than you did to the charts and technicals, you probably would have stayed on the sidelines and missed out on tremendous opportunities to grow your portfolio.
Read the news, but trust the charts and technicals. They will provide you with the full story so you make the right trading decisions.
