Wednesday at 2:15PM, EST, the Fed will announce if they will change interest rates and give a brief statement about the overall economy and how it will affect future rate increases. This occurs every 6 weeks and is a highly anticipated event for the market.
The overall consensus is there will be no change in interest rates at this meeting and for the next few as well. Everyone will be listening closely to the statement, which is what will cause the market to move after this announcement.
Trading on this day is always kind of tricky. First, the volume will dry up after the first 90 minutes or so, as traders pull back and wait for the announcement. No one wants to be holding stocks and have the Fed come out and say something that causes their position to become a loser. After the announcement the market usually gyrates both up and down and can be hard to trade as well.
So, how do you trade this day you ask? We have found the best way is to trade with caution. Look for a few good trades early in the morning, taking profits by 11:30AM EST, and sitting on the sidelines until the announcement. After the announcement, be very careful and let the market make a few directional moves before entering any trades. It is common to see a fast move in one direction, followed by a fast reversal, followed by a turn back to the first move. Waiting for the 3rd move seems to be a better play, but even this can be reversed quickly in a volatile market. The best way to cut volatility is to cut your share size and keep your losses to a level you can deal with. If the market does move your way, you can always add to your positions on the way up, but be careful for that possible fast reversal.
Remember, FOMC days can have good trading in the morning and volatile trading after the announcement. There is no shame in sitting on your hands if you cannot get a good feel for the market because of this volatility.
Good luck on Wednesday.
The overall consensus is there will be no change in interest rates at this meeting and for the next few as well. Everyone will be listening closely to the statement, which is what will cause the market to move after this announcement.
Trading on this day is always kind of tricky. First, the volume will dry up after the first 90 minutes or so, as traders pull back and wait for the announcement. No one wants to be holding stocks and have the Fed come out and say something that causes their position to become a loser. After the announcement the market usually gyrates both up and down and can be hard to trade as well.
So, how do you trade this day you ask? We have found the best way is to trade with caution. Look for a few good trades early in the morning, taking profits by 11:30AM EST, and sitting on the sidelines until the announcement. After the announcement, be very careful and let the market make a few directional moves before entering any trades. It is common to see a fast move in one direction, followed by a fast reversal, followed by a turn back to the first move. Waiting for the 3rd move seems to be a better play, but even this can be reversed quickly in a volatile market. The best way to cut volatility is to cut your share size and keep your losses to a level you can deal with. If the market does move your way, you can always add to your positions on the way up, but be careful for that possible fast reversal.
Remember, FOMC days can have good trading in the morning and volatile trading after the announcement. There is no shame in sitting on your hands if you cannot get a good feel for the market because of this volatility.
Good luck on Wednesday.
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This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only
Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com
This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only
Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com
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