Narrative trading is an approach to trading and investing that focuses on the stories and themes driving market trends and price movements, rather than just relying on technical analysis or fundamental data.
Narrative traders seek to identify and understand the dominant narratives or stories that are shaping market sentiment and behavior, such as:
- Central bank policies
- Economic growth or recession
- Geopolitical events
- Technological innovations
- Market trends and bubbles
By understanding these narratives, traders can better anticipate market movements and make informed investment decisions.
Narrative trading combines elements of psychology, sociology, and economics to provide a more nuanced view of market dynamics.
Some key aspects of narrative trading include:
- Identifying key themes and stories driving market sentiment
- Analyzing how these narratives are evolving and changing
- Understanding how market participants are responding to these narratives
- Using this insight to inform trading decisions
Narrative trading is often used in combination with other approaches, such as technical analysis and fundamental analysis, to provide a more comprehensive view of the markets.