Can identify the reason or not?

Trader's Mindset

Dec 23

Recently watching media coverage on Bitcoin, an analyst made an interesting remark that I felt was worthy of further consideration. He stated that that the problem with Bitcoin compared to other markets is that he could tell you why, on any given day, other markets made a move. The problem he had with Bitcoin is that he couldn’t identify any reason for the move.

Now, this is interesting and, at first, thought seems reasonable. On a moment’s second thought, one recognizes the problem that while one may can identify a reason, post-attribution for any market movement, it is far more difficult to ascertain that the movement happened for the given reason.

When I first started predicting markets, I would watch the financial media for information. However, I quickly recognized that most of the major media outlets would change their top stories based on what the market was doing throughout the day. If the day started off bullish, they’d run a bullish headline. If things started to change then they’d change the headline or feature another post. It was clear that the media was generally following and not leading the market.

It makes me think back to various flash crashes that were attributed to various sorts of phenomena such as program selling or spoofing or other behavior that wouldn’t be explained by the news. That’s not suggest that the news doesn’t influence the market: certain types of breaking news seems able to influence the market, certainly. But, I suspect the majority of financial news is following and not leading.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at