Quote from college_trad3r:
FB123, do you trade an advanced form of tape reading - i.e. watching the price/DOM tick by tick to trade the news?
Well in my case I trade crude, so no - there is absolutely no way to trade tick by tick on that instrument. I never use the DOM, just a very short-range chart.
I could never find a way to trade the news profitable.
Here is a quote from another thread on my method. It's probably the hardest thing to do in the markets, and I don't always do it. I usually do wait at least 30 seconds to 1 minute after the release for it to give SOME indication of where it's going.
http://elitetrader.com/vb/showthread.php?s=&postid=2554697#post2554697
"... after a runup like that and good news coming out, if it doesn't spike higher immediately and keep going, it's going to fall. Same thing in reverse - if terrible news comes out and the market doesn't drop further, start looking for a rally. It was looking weak at the top after that news - that's NOT what you want to see after good news comes out."
Can you clarify this, this sounds very vague. This sounds like a type of quote from R.H.. :eek:
In order to analyze news, you have to analyze it in the context of market action. The big players already knew what the news was. They created a big run up so that people would notice. Then the "good" news comes out, and all the clueless newbies jump in. They think: "The market has gone higher, and now there's good news that came out. Aha! So THAT'S why it went higher! I was holding off before because I didn't know why it was running up - but I'd better jump in now that I'm sure things are good, because now it's got to keep going for sure!"
The average person is clueless. They really don't think much further than good news = higher, bad news = lower, and this thought process is reinforced in them every day by the lies spun to them in the mainstream media about what's really driving the market. That's why they're called sheep. The players set the sheep up, set their sell orders up top, and unloaded as the dummies were buying. Then they created a rout, as all the weak hands sold out in a panic. ("What's going on??!?! I don't understand??!?! How can the market be dropping like this when the news is good?? It must be a mistake! I KNOW the news is good, who are these dummies that are selling? I know, I'll just buy more at these cheap prices since I know that things are fundamentally good now! Oh crap! It's still going down!!! AAAAAAGGHHGH! What the HELL!!!! How long can this damn thing fall!?!?!?! Holy Crap! This is too much!!! SELL SELL SELL SELL SELL
SELL!!!"
Usually that's right about when the bottom comes.
That's how the clueless people are liberated from their money. So when you see good news come out and market stalls (especially after a rise), or you see bad news come out and market just sits there and churns huge volume but doesn't drop very far, it means that the big players are reversing their positions and using the news to get the sheep in on the wrong side of the trade. This is easier to spot at a bottom than a top, usually. Bottoms form in an incredible panic, tops generally have a distribution phase that lasts a bit longer and is a bit harder to spot. Incidentally, they have been doing this for a couple of weeks. The market has been churning in a range for a number of trading days after a rise of 2 months. That's a sign of distribution. There were also divergences forming with other markets that had to make you cautious to the downside.
Right before any big drop you will probably get a quick final rise, and right before any big rise you will generally get a quick final drop to shake out the weak hands and get them going the wrong way.
