O financial markets move very fast as economic reports, central bank announcements, and sudden geopolitical events drive constant change. This is a challenge for most traders because they don’t know what to focus on. Should they focus on each headline or the trading market itself? This article explores why many traders trust charts more than the news.
Charts often mirror market behaviour. News can sometimes mislead or already be priced in. Technical analysis provides traders with clearer, more reliable signals.
Clarity of charts vs. noise of news
The noise of Financial news
Economic releases, political announcements, and central bank strategies dominate the headlines daily, creating an endless stream of financial news in today’s media-driven world.
However, besides limit, is there clarity in the news provided? This is a different story. All in all, the point is not to focus on what the market will do because of the news, but rather how it reacts to it.
Shifting your focus from guessing market moves to observing actual reactions may seem small, but it is important.
Many new traders naturally make decisions based on what they read or hear in the media. Professional traders, though, usually choose a different path by turning to charts since they provide unfiltered data, like price, volume, pattern.
By displaying data visually and in real time, charts help traders interpret market behaviour instead of relying on assumptions.
Why the charts tell the real story
News is noisy by nature. Large institutions often act before news reaches the public. As a result, the market adjusts in advance, leaving little room for surprise.
Seemingly “good” news may lead to a downward movement in prices whereas “bad” news might lead to a rally. If you are a trader that relies only on the news cycle, this mismatch can often lead to confusion and even frustration.
On the other hand, charts are a true reflection of the markets actually feels in real time. All known information like rumours, expectations or actual results are summarised in the price action. This makes the chart a reliable tool for when making decisions.
Charts & market psychology
Another reason many traders trust charts more than news is that charts reflect authentic market psychology in real-time time. Each move on a price chart shows what traders are feeling, whether it’s o medo, hesitation ou o a ganância.
Rather than trying to interpret the news, traders can study how market participants actually behave. This idea, that all relevant information, whether fundamental or speculative, eventually shows up in price, is the foundation of price action strategies.
For example, candlestick patterns are a very old way of decoding sentiment.
A doji candlestick shows indecision, while a hammer indicates bullish rejection of lower prices. A head and shoulders pattern may signal a trend reversal.
Traders find these patterns useful because they expose human behaviour, allowing clear and immediate action.
Similarly, modern tools like Heikin-Ashi charts or moving averages are designed to smooth out short-term noise to help traders spot trends more easily. Therefore, charts turn the market’s emotions into clear indications that traders can use in their decisions.
When markets move before the news
There are times when markets react even before the news is released. According to the saying “buy the rumour, sell the fact”, prices usually move prior to an event because traders were expecting it.
Let’s look at an example.
When many traders expect interest rates to rise, a currency can strengthen before the official announcement.
After that, once the news confirms the rise, the price can instead go down. If you only react to the headline without any look at the chart first, there are chances that you enter the trade at the wrong timing.
There are also common psychological traps like when traders see what they want to see in the news, known as confirmation bias. There are some other traders that hold on to losing trades in the hope of recovering from the next one.
This is connected to loss aversion. Some other times, traders put too much focus on a headline and ignore the bigger picture. This is also known as anchoring bias.
As a result, charts prevent traders from making these mistakes. In fact, charts usually show you what has already happened, they don’t try to convince you do anything, which makes them objective most of the times.
Why chart patterns matter most
Traders rely on charts because they consistently show repeatable patterns. Headlines may always change, but chart patterns keep showing up in familiar ways.
For instance, a double bottom may signal reversal, a flag may suggest trend continuation and an overbought RSI can warn of a correction. Since one can study and test these, traders can make the most our them.
However, keep in mind that no chart pattern is 100% accurate. Still, consistency often appears when looking at results over several trades rather than just one.
News is fast, unpredictable and even stressful. Usually, only professional traders can handle big changes caused by news releases. For most retail traders, it is very difficult to handle slippage risk or risk from unexpected gaps and huge moves in prices.
Technical analysis & emotional control
Trading doesn’t only have to do with managing numbers . It is also about controlling your emotions. Having the correct mindset is equally important to having a good trading strategy. News naturally brings out emotions.
Think of breaking stories that are often dramatic. Their sense of urgency may lead into impulsive trading decisions. Skilled traders might even fail to manage their emotions, often leading to bad entries, overtrading or poor exits.
On the other hand, charts usually encourage self-discipline. Those traders that use technical setups like moving average crossover, a candlestick reversal or a breakout above resistance, know their entry and exit points prior to entering the trade.
This way they avoid going after the market or letting emotions in when sudden news comes up. Although there is perfect strategy, you will probably get a clear structure by using technical setups, making it easier to stay objective, stick to your plan and manage your emotions.
Considerações finais
News and fundamentals certainly play a key role in forex trading as they help traders understand longer-term trends. Inflation data or central bank policy changes for example, might reveal the market’s future direction.
However, to act on such information, the majority of traders rely on charts to guide their timing. A price chart shows all the expectations, reactions or rumours built into the market, which is what traders as a group are actually doing.
In contrast to headlines, which can sometimes be misleading or confusing, charts show how traders are really handling their funds.
They leave the noise out and show patterns that traders can read, test and use again. News should not be ignored, but for fast decision-making, charts are usually more reliable.
Isenção de responsabilidade: Este material destina-se apenas a fins informativos e educativos e não deve ser considerado como conselho ou recomendação de investimento. A T4Trade não se responsabiliza por quaisquer dados fornecidos por terceiros referenciados ou hiperligados nesta comunicação.
