Trade What You See And Not What You Think

Why it’s important to trade what you see and not what you think

Sometimes, I can’t help but wonder what the media is up to? Maybe they are trying to influence the markets or change market sentiment. Or maybe they are just totally disconnected from reality. Or maybe they are hunting sensation?

A while ago I was scanning the news, pre-trade and found an article screaming at me…

“Oil prices skyrocket after attack on oil tanker”

That choice of word: skyrocket!! When I trade oil from time to time, well, then I like skyrocketing, if I have had enough forewarning (of course slightly different emotions will be present if I was short oil). So, I immediately opened my trading software to have a look at this move I have somehow missed.

Trade What You See And Not What You Think

That little green bar – the entire news article was about that little green bar! All I am seeing is an established down-trend and a market that is currently pausing – I am somehow missing the “sky-rocketing” part…

And then, around the same time the media reported about African swine flu that has hit China, and how they had to cull 200 – 300 million pigs, and how that was one-third of the world’s production!  And one can’t help but think about the Lean Hogs contract and what profound impact this “fact” should have had on this market.

So this is lean hogs on a long-term DAILY price chart. The newsletter article was on that red line? If I look back at Lean Hogs – it was in a downtrend and it still is in a downtrend – a loss of ONE-THIRD of the world’s production did nothing!

YET…  News on “expected” cold weather (that almost never realizes), causes Natural Gas to explode, or “expected” heavy snowfall in the winter wheat producing areas causes Wheat to take notice…

In the end, you have to ask yourself – do you trade what the media sells? Or do you accept the media has got no idea and just trade what you see?


What’s the moral of the story?

Trade what you see and do not be influenced by the media.

At Your Options Forecast, we have actually traded these markets around the news events we mentioned and were profitable in both.

Following simple setups and combining them with low risk, yet highly profitable strategies, we were are able to let these markets dictate to us what it “wanted” to do and not what the media thought it should do!

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