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 (why Katy Perry and Justin Bieber each have almost 50 million Twitter followers, I'll never understand). 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.
You first have to define what "noise" means to you. In other words, you have to develop your own bullshit detector (Barry Ritholtz recently laid out Carl Sagan's bullshit detection kit here). While it may seem idealistic and perhaps even admirable to have a news edge comparable to the Amish, the fact of the matter is that you likely saw the horrifying 1929 chart when it first made its way around the Twittersphere back in February, as well as all the other sensationalized charts and predictions over the years. 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. If you were the hyper-sensitive, reactive trader/investor, how has that worked out so far? By the way, here's an updated view from @RyanDetrick of the chart comparing today's market to 1929 that all but seemed to predict a looming doomsday: link. The only think comparable to today and 1929 is that Betty White was alive!
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.
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