Once upon a time there was a man named William Shakespeare, a writer of some renown. While he never fully engaged in the trading game he left all sorts of investment wisdom in his wake. It’s his thoughts on news that I find of particular interest. They were on full display in Macbeth. In Act 5 Scene 5 a budding trader asked him how important economic news was. Said trader was a budding news junkie and wanted to make sure all his toil would indeed increase the profitability of his financial ventures. Listen to Shakespeare’s response:
“it is a tale, told by an idiot, full of sound and fury, signifying nothing.”
Well said, Billy, well said. I couldn’t have articulated it better myself.
Perhaps you’re wondering what the news is good for. Spinning a tale, that’s what. Crafting a narrative to pin a cause on the effect. We humans have to know why something happened. It’s embedded in our DNA. Why did oil go up today? Why did stocks slide? Why are bonds booming? Funny thing is the only true answer to such questions lies with supply and demand. They’re the true culprit. Why did equities tumble? Because supply exceeded demand. Why did those bonds boom? Because demand exceeded supply.
Not satisfied? Well, curse your inner curiosity. You want to know why all those lemmings bought or sold don’t ya? How in the world would we figure that out? I haven’t a clue why the masses playing in stocks on any given day bought or sold. I’m smart, but not that smart.
Look, I like to write. It’s immensely satisfying. Do you think I can get paid to write an article explaining why the entire market or any particular company went up today and simply leave it at demand exceeded supply? No! I need 500 words. A compelling story couched in frilly language to entertain readers. So I make something up. Just like every other writer out there. We just pretend we know what moved the market by playing pin the tail on the donkey.
Bad economic report out of China? Bam! There’s a cause. Must be why Aunt Ida sold her IBM shares. Trump becomes the presumptive Republican nominee? Bam! There’s a cause. Must be why Timmy and crew piled into gun stocks. The apocalypse is a comin’.
Knowing why the market rallied or fell on any given day doesn’t make you a dime. The questions where answers pay are what and how long.
If you’re looking for something else to obsess over, if turning off the boob tube (arguably the worst nickname ever devised in the history of man for the television) leaves a void in your life, then I suggest focusing on what really matters – PRICE. Get lost in a chart, baby. That’s all you need to really sink your teeth into supply and demand.
I just simplified your life by 39.5%. You’re welcome.
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13 Replies to “Tales of a Technician: How to (Not) Use News”
Many thanks for simplifying my life! Great article. I think it applies to more than just trading sometimes.
Love it Ty!! Love it!!
Thanks Tyler
Great read, Tyler. The picture in the comic strip looks like Gino’s workstation–difference being Gino’s monitors are displaying charts and market internals instead of news
Thanks Tyler! You just relieved my news anxiety.
On any given day you can find contradictory news about almost anything. Our need for understanding coupled to our tendency to see things in a way that supports our way of thinking is part of why news exists. Shakespeare had it right. The news is just a distracting bunch of noise and confusion. None-the-less people react to it and if you are alert enough you can predict what “the masses” will do based on news reports. No doubt someone with deep pockets has or will use big data mining to design a news trend aggregator to send signals to their trading software.
Let me know if you have this going for you yet…
Think you hit the nail on its proverbial head.
Tyler, great stuff! I love a good laugh and therefore I look forward to your witty posts. keep ’em coming!
Thanks Tyler fun read lots of laughs
That’s just another value of becoming the Tackle Trading members. My life just simplified by 39.5%! Before Tackle Trading, I used to spend 2-3 hours reading the news! LOL
Thanks Tyler!
News junkie here, and I had to laugh at myself! Thanks Tyler for your insightful humor.
Thanks for the simplification. I needed it.
as always very interesting. and a hard habit to break
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