You often hear about how you need to block out the “noise” in order to be a successful trader/investor, i.e. turning off the television, not watching your twitter stream, etc. While I don’t disagree with the fundamental premise, what I do disagree with is the practicality of trying to apply this head-in-the-sand approach at its extreme. I think a more realistic approach is selective consumption of information. This is why I love Twitter’s service of allowing users to customize their news feed to only the most pertinent information to them and their needs. There is so much good information out there that you would be doing yourself a disservice, in my opinion, by not trying to learn and grow. However, finding such useful information can be extremely difficult to do especially for newer traders. Becoming smarter and more efficient with our information consumption is a real challenge, one that most if not all of us, including myself, need to tackle.
We are constantly bombarded with “news” so to think we can suddenly turn off the natural instinct of wanting to hear what the guy flailing his arms on TV has to say is unrealistically idealistic. As Josh Brown says, “The Myth of the Media Diet” is a perfect strategy for a perfect world; the only problem is the latter isn’t true. I think investors do, however, need to define what news and information in general is the most important to their trading strategy, in terms of having real implications on their returns. Developing a true news edge can be a difficult task but, in my opinion, can be one of the most important factors in your trading.
I don’t think being aware of the so-called “news” is the problem. I think the danger comes when you then act on this commentary that is propagated as being news.
The morale of the story is don’t pretend that you’re able to completely block out the noise. Honestly, if you think that, you’re just lying to yourself. Instead, learn how to filter the news until the most germane piece of information is left, which will often be relatively scarce. Tadas Viskanta does an excellent job of doing just this for readers over at Abnormal Returns.
My primary “news edge” so to speak is the tape (price action). However, I recognize that the noiseless utopia that we dream about is simply a hopeless fantasy.