Why You Need News (Market Sentiment)

Apr 19, 2023

There are Traders out there who simply ignore news at all times, deciding it's not important to listen to and read. Sometimes, this can be because they believe it makes trading confusing, but this blog is here to show you why that really isn't true.

The first thing to understand is the difference between market 'News' and market 'Sentiment'. 

Market News relates to individual news events that are important in the display of economic standing, like Consumer Price Index Data (CPI) or Unemployment Data. These events can give an indication of both the short and long standing of any economy at any time and are open to debate and opinion. Market Sentiment differs and is far more useful, because you don't need to be an economist to understand it. You just need eyes and a brain to read between the lines. If market news events are poor and traders start to dislike it, you can form a bias on where you stand within it. It doesn't matter if you know what the economic words actually mean, you just need to understand the mood and risk of the current market that you are trading.

Market News directly dictates how, where and why markets move be it long or short term. When News comes out, be it economical, political, or otherwise it causes Traders and investors alike to make decisions. These decisions are mostly should I get Long, Short, Enter, Exit? This is always based on either hope or fear. In other words, people start buying because they are looking to exit later at a higher price and are therefore hoping price rises, or they are looking to get short or exit positions because they believe the price will fall on market fear. Often when there is a lot of news, markets move faster and they do so between technical points on charts. That is what makes a trading plan; Technical aspects (looking at where traders prefer prices) and Fundamental aspects (everything that causes volatility between these points). The actual substance of the news does not matter, it's just the mood of the market and the volatility that is important as well as the risk on/off sentiment.

In either case, the fact remains that this is the cause for buying and selling and both come hand in hand. This is why it's important that you do not ignore the main thing that is actually moving markets at any time and causing volatility from increased or decreased buyers and sellers. In between market news, Price Action levels give you points where Traders are naturally buying and selling or have preferred a certain price, but even so this is often based on long term news. A Price Action level that is hit within a downtrend, or long term poor sentiment / news, acts as guidance on what is a fair price and what is not, which is visible once you have traded for long enough.

Some people trade on Price Action alone and this can work. The benefit that comes from taking note of Market News and Sentiment is that when risk changes a lot, i.e. in the case of major economic/political news, you can change your exposure or trade size. Having the same trade size in riskier markets can be less appropriate and not suited to the current situation or mood of the markets. So keeping track of Markets News events individually is not as beneficial as following them collectively and forming your overall bias and adjusting your trading based on it.

You can learn all of this at GoldStreak trading.

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Will Sebastian

Founder Of GoldStreak Trading