Market Noise and the “News”
I am reminded in reading some of the headlines today that financial news reporters are completely clueless. Check out a graph of the S&P 500 on a daily basis including today’s action up until the time of the news article:
Notice how today’s daily range is barely detectable on the daily chart? That means that you should ignore today’s action and certainly any “news” that caused it. The market has to move 2.5% from here to mean anything at all.
It is my observation that there is a persistent need on the part of many beginning traders to react to or explain noise. Unless you are a day trader or swing trader, today, the market has done nothing at all. It is a meaningless day by itself. It is certainly not a day to make decisions. It may be a day setting up decisions for a future time (even, perhaps, later today after I submit this post) in some way. But it is not a day to make decisions.
So by using the headline “Wallstreet Lower After Housing Numbers” which implies that something happened, the New York Times is wasting my time by misleading me into doing something I would not otherwise have done. When I read the article even a few sentences and find out that I turned the page (or clicked on a link) for naught, that the headline is bogus, I don’t like it.
Is this a big deal? No. But it is annoying.
If nothing happened, ipso facto, nothing that caused it is exerting any influence. Better just to call it a “quiet day” and leave it at that. Now if something big happened but the market was quiet, that might be news, i.e. the fact that the market did nothing.
So when the market does nothing after some minor news, that’s not news, that’s noise. What do we do with noise? Turn it down or turn it off.
So it puzzles me that newspapers don’t understand why readership and profits are down so much. If they feel the need to supply news even when there isn’t any, why should they expect people to keep paying attention to what they say? Do they really think people will be happy to pay to tune out? Or might readers perhaps wonder if there are any real editors left in the industry.
21 Responses to 'Market Noise and the “News”'
Leave a Reply
Design © 2007 Curtis M. Faith - based on the book jacket design by Anthony Landi
Turtle image: © Juniors Bildarchive/Alamy
Stock ticker image: © Don Mason/Corbis
Powered by Wordpress 2.1
Except where otherwise noted,
the content on this site is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
on May 29th, 2009 at 2:52 am
Curtis,
don’t get me wrong, but this blog post of yours has also been just noise which sounds like venting
Cheers,
Markus
on May 29th, 2009 at 8:31 am
I was venting. But I get to do that on my own blog.
I was also making the point that financial news is useless. Now, that’s not a new point to most people, but I do find it often useful to review specific examples to reinforce correct beliefs from time to time.
- Curtis
on June 2nd, 2009 at 8:00 am
Good Morning Mr. Faith,
Could you please contact me on my e-mail address.
I need to talk to you.
Best regards
on June 7th, 2009 at 11:03 am
Hi Curtis, the financial news is amusing in that regard. One could write a “financial news generator” fairly easily -
Stocks (up/down) (because of / inspite of) news of the day.
And bondpriceswhichmoveinverselytorates were (up/down) as well.
BUT - what if you ARE a swing trader? Trying to capture the excess volatility created by people reacting to the noise? Then today’s range is of great interest for it represents your opportunity.
on June 7th, 2009 at 7:06 pm
Right on, Curtis. Maybe one could call this “news fitting”?
I just finished The Turtle book and thought it was fantastic. I’m sure I will reread it a few more times. Now it’s time for the Mind book.
Thanks!
on June 8th, 2009 at 10:29 am
“BUT - what if you ARE a swing trader? Trying to capture the excess volatility created by people reacting to the noise? Then today’s range is of great interest for it represents your opportunity.” - michael
Swing traders will be looking at different chart timeframes, perhaps a 15 minute chart, for example. The same principle applies to the intraday charts. News that results in no price movement still isn’t news.
Intraday charts will have different noise, however. So it is very possible that what might be considered noise on a daily basis is significant to a swing trader on an intraday basis.
on June 9th, 2009 at 10:37 am
Maybe the problem with US politics is the press tries to frame in the same terms as they do the markets.
I always get a kick when I make a good trade due to a technical set-up and then read the news “gold rallied today on renewed inflation fears”. I thought it was because the resistance broke and the osccillator flipped. Its all subjective but for the numbers.
I´m a game designer who is gearing up for a career in trading system design, currently in BsAs working for an Argentine studio. Your book really put in perspective the overfitting and overoptimization exercises I´ve been through since the start of the year, as well as the apparently common experience of doing 200% in a month and then crashing. If you´re in the area and would like to meet up to bounce some ideas around send, please me an e-mail at 666to777@gmail.com
on June 10th, 2009 at 12:50 pm
Spot on. Real news is only like 1% of the reported news, and the sad part is that it gets dilluted in the noise.
I used to be an avid news watcher (reuters) but realized that news is following price and not vice-versa. If the price goes down then any news that day is taken to be bad and if it goes up then its supposed to be good. what was hillarious that the same news would be reported as both being good and bad.
I dont look at news anymore, at all. no tv, no press. Its a waste of time.
on June 16th, 2009 at 9:16 pm
Curtis,
I has read your book and i curious is the turtle trading system can be use with small size account ?
Thanks,
on June 21st, 2009 at 10:09 pm
Curtis,
I agree that the listening to news is a waste of time. Hardly any suprise, so I agree with the first poster that your post was noise as well. But ignoring the fact that you were right, why should one even listen to you? You are obviously not a trader even if you used to trade at some point in your life. You wrote a book about trading and you sell trading software. Why listen to someone about trading who can’t make money trading?
on June 22nd, 2009 at 1:47 pm
Hermann,
Since you are so sure that I don’t know how to trade and can’t make money trading, why are you bothering to read my site? I think you’ve been spending too much time reading Covel’s BS.
If you think I have nothing to offer, I don’t really care, go somewhere else. I can’t please everyone.
on June 22nd, 2009 at 10:21 pm
Curtis,
Did you still trade ?
You and Covel look like has a problem. ^_^
on June 22nd, 2009 at 10:26 pm
Yes, I still trade. I don’t trade long-term these days. I prefer swing trading because I like to travel and take time off from trading for a few months at a time. You can’t do that with a long-term trading strategy. Swing Trading is much better for me as most trades only last a few days or weeks.
on July 5th, 2009 at 11:05 pm
Curtis,
I’ve read your book, and just before I started reading it again, I decided to google your name to see if you had a website or something, and here I am.
I’m sure the lack of response isn’t motivating (I say that in relation to the very few comments here), but I’m sure that “if you build it, they will come”.
I hope to read more of your thoughts in the near future.
Best of luck.
on July 23rd, 2009 at 9:23 am
curtis,
just read your book . gr8 book.am from india. cant understand how pretenders like covel still make it in U.S
wishing you the very best in all your endeavours.
on July 26th, 2009 at 4:01 pm
Mr. Faith, just read that you are doing Swing Trades. Do you have a trading / recommendation letter?
If not, ever considered about doing one?
Thanks in advance for your response.
Wish you the best in all that you do.
on July 30th, 2009 at 3:08 pm
Curtis,
Any serious thoughts about a new trading software business? Perhaps geared towards swingers…
Cheers,
RtR
on August 12th, 2009 at 12:09 am
Sir,
I studied the turtle strategy. The rules state to increase your position every 1/2N. I read in Covels book they increase position every 1N. Can you explain the discrepency? Is it better to use one or the other in certain cases?
Thanks for your inspiration.
Aspiring Turtle,
-Orion
on August 12th, 2009 at 10:22 pm
Hi Curtis,
I thoroughly enjoyed your book, i read yours first then i read Covel’s one. Although Covel’s is an interesting read due to the back stories etc, it doesnt really go into the nitty gritty of the Turtle systems and philosophy like yours does. Your chapter on Cognitive Bias was great!
Cheers
on September 1st, 2009 at 3:52 am
Did anyone know how to get dollar volatility value ?
I has read the book but there no explanation on how to get dollar volatility value. is weird the value just pop up from no where. ^_^
Regards,
on September 4th, 2009 at 12:33 pm
Curtis,
When you do swing trades, do you do that in Turtle-like manner or more like, let’s say, Alexander Elder’s kind of trading?