Trading Lesson of the Week

• December 14, 2025
• V.QNC | BTCZ

In This Week’s Issue:

• Market Outlook – Market Cap Rotation
• This Week’s Market Minutes video – How to Buy Strong Stocks on Sale
• Trader Training – Should You Read Stock Market News
• Strategy – Abnormal Gainers

Market Outlook –  Market Cap Rotation

Large cap stocks have made back their recent losses and are now at resistance at the all-time highs. It feels like investors have had their confidence broken and they are not willing to chase high valuations. As a result, we are seeing money rotate out of some of the high flying tech stocks and coming into the small cap stocks which have been able to outperform over the past few weeks. However, they still lag the long term performance of the S&P500 and Nasdaq100 by a significant margin.

It is important to not try too hard to find trading opportunities because that leads to taking marginal trades. Be patient and wait for the right opportunities, they will come.

This Week’s Market Minutes Video – How to Buy Strong Stocks on Sale

There is a simple and effective strategy to buy strong stocks on sale. This week, I show how to use momentum and pullbacks to capitalize on trades among market leading stocks. Then, I provide my analysis of the overall stock market to determine if we should be concerned about a crash or a correction. Finally, the day trade of the week on OCG.

Click Here to Watch on YouTube

https://youtu.be/fPohabJP1gA

Commentary – Should You Read Stock Market News?

For many investors, keeping up with financial news feels like an essential part of trading. Headlines about market movements, earnings reports, and economic policies can create the illusion of insight and control. However, seasoned traders and market experts often argue that relying on news can be misleading, reactionary, and even detrimental to a successful trading strategy. Here’s why reading the news is not as useful as it seems in stock trading.

1. News is Already Priced In

Stock markets are highly efficient, meaning that publicly available information is almost immediately reflected in stock prices. By the time a trader reads a breaking news headline, institutional investors, algorithms, and market makers have likely already reacted, making it difficult for retail investors to gain an advantage.

2. Emotional Reactions Lead to Poor Decisions

News is designed to capture attention, often using sensational language to evoke emotional responses. Fear-inducing headlines can prompt panic selling, while overly optimistic reports may lead to impulsive buying. Emotional trading tends to result in losses because it leads investors to deviate from disciplined, data-driven strategies.

3. Misinformation and Biases

Media outlets aim to generate engagement, which means they sometimes prioritize eye-catching stories over accurate, unbiased reporting. Additionally, financial news often contains speculative opinions rather than actionable facts. Traders who make decisions based on speculative or biased news may find themselves on the losing side of the trade.

4. Short-Term Noise vs. Long-Term Trends

Most financial news covers short-term market movements, which can be highly volatile and unpredictable. Successful traders focus on longer-term trends, technical analysis, and fundamental metrics rather than reacting to daily headlines that may have little long-term significance.

5. Market Manipulation and Fake News

Some news stories are deliberately spread to influence stock prices. Corporate executives, hedge funds, and influential investors sometimes leak selective information or make public statements to sway market sentiment in their favor. Traders who rely too much on news risk falling victim to market manipulation tactics.

6. Delayed Reaction to Important Events

By the time news is reported, professional traders and high-frequency trading (HFT) algorithms have already executed their trades. These automated systems react to news in milliseconds, leaving retail traders at a major disadvantage. This delay makes it almost impossible to profit from news-based trading strategies.

What Should Traders Focus on Instead?

Instead of relying on financial news, traders should develop a structured trading plan based on the idea that tomorrow’s news is being priced into the market today. This happens because those with the best access to new information start to price in news before it is made public.

Rather than listen to what people or news outlets say, pay attention to what they are doing with their money. I look for abnormal price and volume activity to tell me that the investors with the best access to new information are acting on something important. Applying basic chart analysis skills can provide insight on what investors are doing with their money and paying attention to abnormal trading activity can highlight the stocks that are making significant improvements to their business before the news comes out.

Here are some simple rules to make you a better investor without reading news:

Don’t fight against pessimism. If the trend for the stock you are considering is down, don’t buy it. Wait for falling tops on the chart to give way to rising bottoms. When this happens, the Sentiment Stockscore will typically move up through 60.

Find alpha. Look for stocks making abnormal price breaks through resistance, from low price volatility as bottoms begin to rise. Most strong upward trends start with these abnormal price breaks that surprise the market. It is the sign that investors have found a reason to be excited about the company.

Plan to be wrong. No trading or investing strategy is right 100% of the time. This means you must plan to take a small loss if the stock falls back down below support on the price chart. Don’t let a small loss turn into a big loss.

Conclusion

While staying informed about major economic events is useful, using news as a primary basis for stock trading is often counterproductive. The market moves faster than the news cycle, and emotional reactions to headlines can lead to poor decision-making. Traders who focus on data-driven strategies focused on abnormal trading activity rather than reacting to news headlines stand a better chance of long-term success.