How To Trade The FOMC Week

If you’re someone who lives in a cave and eats rats for Breakfast, Lunch, and Dinner, or someone who is working a job they love, I recommend you stop reading immediately, as you’d be better off taking the week (FOMC Week) off, and spending some quality time with your family and friends. This post is specifically targeted towards the Brave Warriors who wake up every morning and go to war against Financially Superior Humans and Godly Machines, just so they can make enough to provide for their family and pay their bills. This is the choice that they’ve made, and I respect that. Even though my first bit of advice would be to avoid the FOMC week completely, I understand that for some of you, that simply isn’t a choice. In this post, I will share some of my personal observations of market behavior during the FOMC week, which will hopefully help you make better trading decisions.

Trading The FOMC Week:

1) Always pay close attention to the Media (including Social Media) going into the FOMC week. You can get some really useful hints as to what the general feeling/consensus among the market participants is, and what the market expects from The Fed. Even though I despise the media, it cannot be denied that the media is simply a proxy for the real agenda of the Drug Lords and Financial Mafia (Government/Corporations/etc…), and as such, can be used to our benefit to know exactly what The Man is thinking. Like for example, going into this week’s FOMC announcement, there’s a lot of talk about QE Tapering and Bernanke pulling away the proverbial punch-bowl. But over the past couple of days, thanks to the media, it appears that wont be the case. Hence the market is UP for two consecutive days. Triple digit gains on the DOW.

2) Avoid buying Stocks and trade Options instead. Debit Spreads is a good strategy if you wish to minimize your risk (losses). Or, Straddles.

3) The FOMC announces its decision on Wednesday, usually at 2 PM EST. It is recommended that you flatten all your positions before 1 PM EST. Between 1 and 2, the big guys are positioning themselves/hedging their bets, and you don’t wanna get caught picking pennies in front of a bulldozer.

4) Making something is always better than making nothing (Losing Money). Be happy with your profits. Even if you made $1. At least you didn’t lose money. Pat yourself on the back for a job well done. Move on to the next trade.

5) If the FOMC disappoints, the market volatility will be off the charts, and not suitable for retail traders. Position yourself wisely if you choose to continue trading. Usually this volatility will remain in the markets for the next couple of days/weeks, until the market gets some more clarity from the next FOMC meeting. It’s just the way how the system works. Instead of fighting it, learn to use it to your own advantage.

6) Don’t be greedy. You hit your desired targets/profit goals, get the Fu*k out of that trade. Don’t hang in for couple extra cents. You will get killed.

7) Use Tight Stops. The idea of Stop-Loss was invented to be used during volatile market conditions. So use it. Especially if you’re someone who trades FOREX.

I hope my Observations/Tips help you make better trading decisions.

Stay tuned for the next trading tip.

Wall Street Fool

Wall Street Fool provides unbiased real-time market analysis and commentary for Stocks, Bonds, Futures, Forex, Fixed Income, and Derivatives markets.

About Wall Street Fool

Wall Street Fool provides unbiased real-time market analysis and commentary for Stocks, Bonds, Futures, Forex, Fixed Income, and Derivatives markets.
This entry was posted in Bonds, Credit, Forex, Futures, Observations, Stocks, Trading Tips and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.