If you’ve been performing both fundamental and technical analysis of late, you may have noticed that some financial media and mainstream news channels have been releasing questionable headlines and confusing narratives that don’t always match the price charts.
Can you rely on the media to paint an accurate picture of today’s markets? Let’s explore ways to get a broader understanding of market sentiment and avoid getting played by propaganda and hype.
Diversify your news feeds
Some traders trust Bloomberg and CNBC, while others prefer Reuters and the BBC. Then there are the independent news sites and blogs specifically dedicated to keeping traders updated. You probably have a few favorites, but limiting your media input to one or two channels might mislead you. Consider expanding your exposure with a simple trick.
The next time you see a headline that catches your attention, run a search, filtering for news results. Let’s say you trade the S&P500, and a headline announces, “S&P 500 closes near flat as Powell warns of more restrictive policies.” Searching “S&P 500” news that was released within the last 24 hours may yield contrasting headlines that will shock you.
Consider getting perspectives from other countries and continents too. The U.K. and the U.S. may explain GBPUSD price actions in very different ways. How do China and Australia perceive the same price action? Expand your search internationally to avoid a one-sided perspective.
Question the copy-paste “coincidence” news
It’s not unusual for blogs and news outlets to favor quantity over quality. Search engine algorithms reward sites that churn out content, which motivates publishers to blast out dozens of articles daily. Finding so many relevant or significant events isn’t always possible, and writers are forced to get creative. An easy (or lazy) approach is to simply copy what everyone else is writing about.
The copy-paste articles rarely offer value for traders looking for actionable intelligence, and in some cases, the conclusions being reached can contradict the charts. Sites rewording mainstream news without any independent analysis or investigation should be avoided, as trading on those headlines may result in disappointment.
Moreover, some writers are happy to simply link any occurrences with a price action that shares a similar timestamp. These coincidental headlines are easy to recognize once you know what you are looking for. Here are a few examples.
- Chinese stocks fall after new Covid cases in Beijing
- Texas heatwave pushes up US Oil prices
- Asian shares flatten after Russian rebellion fails
Connecting an event with a price action simply because they occurred within a few hours of each other is misleading, and all traders should question such claims. In most cases, a quick glance at a chart, zooming out, will reveal that the price action is within the normal price range and far from unusual.
If you are following blogs and news feeds that publish such headlines, consider removing them from your favorites list.
Don’t trust artificial intelligence
A.I. has made leaps and bounds in the last year, to the point where responses seem articulate and authoritative. But A.I. is known for making the most bizarre mistakes. Asking AI for a nation’s inflation rate can commonly return a figure that is completely fictitious. When following up with “are you sure?”, you often get an apology followed by a completely different number. Asking a third time will sometimes yield a third random figure. When it comes to numbers related to inflation, CPI, and interest rates, stick to official .gov sites.
Experimentation with certain A.I. platforms will also reveal clear bias on certain topics. When asked to expand on their conclusions, the platforms will suddenly end the chat thread.
Whether there is a deep-seated conspiracy behind the disinformation - or just technological teething problems - is unclear. What is clear is that A.I. cannot be considered a trusted source of information for traders at this point in time.
The chaos of conflicting forecasts
Going to blog and news feeds that publish dozens of articles each day and reviewing the main feed can give some amusing and confusing results. It’s common to find two articles side by side claiming completely contrasting opinions on an event or forecast.
If your preferred blog or news channel contradicts itself within a few hours, it means that there might not be any expert oversight on the conclusions being published.
Propaganda and hype
For many of the above issues, the problem comes from lazy or incompetent writers, but sometimes the message is intentional. If an institution or hedge fund suggests Bitcoin to its clients, a global crypto hype would certainly please those investors. And what better way to achieve such hype than by saturating the internet with bullish headlines that will be copy-pasted by dozens of sites?
That said, sometimes the hype generates enough interest to become a self-fulfilling prophecy, and traders acting upon it early enough do get desirable results. But, a trader late to the party risks getting left holding a losing position after the institutions have dumped the asset at a high.
Conclusion
As a trader, it’s wise to diversify the information sources that influence your trading decisions, but casting a wide net means you’ll catch a lot of rotten fish. Question every headline and conclusion using the above points, and never blindly accept the news as truth. Keep in mind that popular financial blogs and mainstream media can indicate - and even generate - investor sentiment that moves markets. Understanding how thousands of traders might react to news can keep you ahead of hypes, spikes, and crashes.
Media hype, just like rallies, tends to start slowly, quietly gaining momentum before rocketing, so it’s not easy to recognize its arrival. So, investigate unique stories without delay.
Official revenue reports and economic data releases can also have a massive effect on market sentiment and prices. Consider how the trading “herds” might react: trade with the aim of preempting the influenced trading sentiment, rather than the news itself.
If you do spot media hype that’s already circulating around multiple channels, it’s probably already too late to trade. As the saying goes, “Buy the rumor, sell the news.” Be wary of anything already trending, unless there are new insights being offered. If you’d like to automatically receive breaking financial news and quickly compare the claims against the chart prices, install the Exness Trade app and stay up-to-date wherever you are.
