I always advocate that investors should not to pay too much attention to financial news. The main reason is that as a retail investor, your reaction just cannot beat the “big sharks”.
This morning, when you may be having your company meeting, having a toilet break or even watching the computer screen, Reuters announced that Europe seals new Greek bailout to avoid default. Take a look at how the EUR/USD market moves below, within a couple of minutes, EUR moved up 70 pips and was up more than 100 pips after a short while. If you were shorting EUR with just a standard $100,000 contract, you would have lost US1,000 within minutes.
EUR/USD 2012-02-21 After Greece Bailout Announced
Many traders and investors like to set “Mental Stop”, or worse still, “NO Stop”. They check the price several times a day and try to react whenever they heard some news. The hard truth is that, you will always be late by doing so.
If you try to catch the train when the train has already moved, you will be in an equally dangerous position, you can be easily shake out by a fast moving train as well.
What you should do is to select the destination, check the schedule, buy the train ticket and buy the insurance, so you will never be caught by a surprise.
People with day jobs should not be trading FX – esp. not without auto Stop Loss, Trailing Stop Loss etc.
Safer to do equities.