Financially literate or just a lemming?

[Sharkfin]

I believe it's a universally accepted principle that a little knowledge is dangerous. On the other hand, we all strive to gain more information in the belief that it will better equip us for trading.

My problem as a newbie is analysing and quantifying the merits of certain financial information. I read of scandals, poor trading figures, world events, interest rates poised to rise or due to remain flat but I can't seem to read the info correctly.
Some examples:
1. Underlying position of the indices was strong last week - correct, but China created a bearish week anyway. Iraq didn't help.
2. Fed threat of putting up rates universally seen as not a short term concern, more likely to occur in June - didn't matter, people got nervous and Dow slipped
3. FTSE expected to watch NY re Fed decision and to follow US lead - didn't see that yesterday, FTSE moved up some 50 points, Dow dropped - some commentators saying Monday Bank Holiday was London catching up (really, that simple, surely not??)
4. Bonds due to fall re threat of Fed rise - didn't happen, they were steady or slightly higher at the close.
5. Ms Swann supposed to be doing a great job at WHSmith - no price rise though, if anything has slipped.
6. Shell reserves scandal and concern over profits - BP supposed to be better placed for R&D, etc - no major effect on Shell price however.
7. Abbey takeover - commentors unsure as to its merits - big rise however.
8. RBS - US expansion (seen as a positive move) - but RBS price down.

Where am I going wrong? Where is the real information? I hate reading the FT in the morning and seeing some journo back-fitting the reasons why the indices or share prices moved. For example, if China or Iraq was so bad last week why have things improved. The situation has not changed.

Yours exasperatedly, Sharkfin.

 

[bracke]

Sharkfin

You see the real information, unless lies are being told as they sometimes are.

It is not the information that counts but the way the markets react to it and that depends on mood , perception, rational or lack of it.

A given set of circumstances will cause the markets to move in a given direction, the same cicumstances on another day will cause ithem to move in the totally oposite direction.

Trying to forecast the movement of the markets from the news information is fraught with danger, thats why many on this site will tell you not to forecast what the markets will do but react to them by looking at price movement and volume (supply and demand) support and resistance.

Remember its not what they ought to do, its not what they should do, its what they do do and unless you bear this in mind dodo is what you will end up in.

Regards

bracke

 

[neil]

Try Technical Analysis - the Funnymentals are already priced into the charts.It's not unusual for charts to give the first inkling of a price move, and the fundamental reasons for such move to be published after the event.

In short: charts lead the way, fundamentals follow up in the rear.

So, if you are trading, it's the price action (chart) that interests you. Not late news.

Of couse, it's nice just to concentrate on one thing ( Charts) , instead of a myriad of conflicting news reports, essays, TV pundits and runestones

 

[jpwone]

Hi Sharkfin

With regard to newspaper comment. You have to remember that a journalists role is to report what has happened and not what is going to happen. By the time you read it in the papers the market has already reacted. Articles and editorial comment are a different kettle of fish and the writer can cherry pick facts to support the view they wish to put forward. Papers can be good for historical information but are a poor source of current information in my opinion.

Any company proposing to expand into the US is likely to be sold off. The UK has a poor track record when it comes to succesful US launches.

I try to remember to trade what the market is actually doing and not what I want it to do or think it should do from a macro economic perspective.

 

[Sharkfin]

Thanks guys, they're all sensible comments.
When one talks of trading with or in line with a trend, presumably, the meaning is to trade in line with the technical analysis (MAs, cross-overs or whatever is one's personal preference) and NOT what the market is doing (intraday) or did (session close) - which could just be noise? Correct?
Best regards, SFin

 

[TBS]

depends on your time frame, to some a trend lasting for an hour may be considered to be 'long term'

 

[Mr. Charts]

Trading news is a loser; trading the market's reaction to the news is potentially profitable.
Read a good TA book and then start to think and read market sentiment.
Do not place total reliance on any one approach and do NOT start searching for the holy grail or you will spend a futile life time.
Start thinking about risk management and money management, the psychology of trading and then start looking for methodologies with steady consistent results. Do NOT think you will suddenly make a lot of money fast.
Don't assume that most people on BBs know what they are talking about, only a few do.......
Don't even think about wasting your money buying a ready made "system".
Remember that to learn how to do anything complex successfully and well, you need a proper education.
If you decide to teach yourself, fine, but be prepared to spend years and make lots of mistakes.
And if you are a gambler, DON'T trade.
If you want my opinion about who on these BBs you should read and learn from, drop me a privmail, because there are apparently 12,836 peeps registered and I don't want to upset 12, 826 ;-))))))))))))

 

[Sharkfin]

Coach
Thanks for that. I will send you a PM.
Mr Moderator
How do I send a PM?

 

[Mr. Charts]

click on my name and then scroll down to
"send a private message"