Do You Listen to Network Financial Networks While You Trade? You Shouldn’t

I have an open microphone policy in my trade room, which allows trading room members to interact with me during the cash trading session. It is not unusual to be speaking with a room member and hear a financial network blaring in the background. It is my belief that trading while listening to financial news can be very detrimental to your trading success. These networks typically trot out individuals to assess current market conditions and make prognostications on various aspects of trading and investing.

But there is a distinct problem with gaining trading information from a network. They all have an agenda which you may or may not complement your trading. In addition to having an agenda which is usually based upon the political affiliation the network cultivates, many of these guys are merely speculating on possible outcomes of the daily market activity. What good is that?

To be a profitable trader it is essential that you make your own chart analysis and initiate trades based on that analysis. In the short term, only chart analysis is an acceptable method of trading along with a dash of real-time indicators. There is no question that a television “talking head” can predict short-term price movement.

Today was a great example of why your analysis is far more valuable than the network trading brain trusts. I often listen to one or more financial networks before the trading begins because I am interested in the stock issues that affect the NASDAQ. There was a general consensus among this morning’s panelists that the NQ was going to make a new high in the morning session.

Guess what? The morning NQ action was to the downside, not the upside. The market did not make the slightest attempt to rally but stayed in a degrading continuation channel and spent a good deal of the time testing new lows. So much for television prognostication. It is usually just generic speculation that often coincides with stock issues in the speakers portfolio. Even worse, there is a good chance it may be simple speculation about what could happen.

Another great example of misinformation these “talking heads” spread is pre-market projections based upon the overnight futures direction. In my experience, because the futures prices are down overnight indicates only a slight correlation to what the cash session traders have planned for the day. So next to year hear, “the overnight futures price action indicate the market will move to the downside” you can generally discard the information as folly. The overnight traders and the cash session traders are two distinct groups and frequently have different goals and motivations.

In summary, I listen to music or just enjoy the silence while I trade and trading off of advice given by “experts” can cause you (or me) to have a directional bias. A day where you have a bias of dubious distinction is the recipe for trading disaster. Do yourself a favor and forego the “experts” and make your own trading decisions based on what you see developing on the chart.