7 Ways to Deal With Stock Market Noise

by Greg Rieben

I don't know about you but I feel like every single day we are incessantly bombarded by information. The latest tweet storm from President Trump, a "fake news" story in your social media stream, misinformation, disinformation (yes, there's a difference) and even sidebar clickbait.

Even if the news is factual and reliable, it can still create a lot of confusion when trying to make important investment and trading decisions.

As an example, Trump's tweet from a couple weeks ago with regards to halting stimulus, sent stocks plunging intraday. Those losses were quickly erased within a couple days. 

As we move closer to the US presidential election it's a safe bet that the amount of noise coming from the candidates and the news/media will be overwhelming. 

Here are seven helpful ways to deal with stock market noise:

  1. Limit The Amount of News That You Take In: Personally, I rarely read the news and this has increased my returns immensely. A simple scan of the major headlines is usually good enough to realize that you aren't really missing anything.
  2. Focus on Closing Prices: The intraday volatility will more than likely only increase around the election. Paying too close attention to the intraday price action is a good way to get scared out of otherwise good positions.
  3. Zoom Out to a Larger Time Frame Such as a Weekly or even a Monthly chart. This will help keep the big picture and primary trend in mind. Remember, stocks as a whole go up over the long-term.
  4. Hold More Cash or Low-Risk Investments: There's nothing wrong with going into "preservation of capital" mode if you are worried about the markets.
  5. Trade a Smaller Position Size: If you are trading in this environment make sure you adjust for the potential swings that can come from knee jerk reactions to a particular news release. Trump's stimulus tweet is a good example as stocks sold off initially but quickly recovered and traded higher a couple days later. 
  6. Be More Aggressive in Taking Profits: There's nothing wrong with hitting the sell button or taking partial profits when you have a trade go your way in a short amount of time. 
  7. Trade Less or Don't Trade at All: There's an old trading adage, "no position is a position". You can't get hurt if you aren't participating

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