Finding Trade Setups From ‘Fed’ Events
Big events have proven to be opportunity points for traders throughout market history.
And big government regularly delivers for opportunistic traders.
(Check out the video, above.)
How to find and trade with fed events
Simpler’s traders regularly follow Federal Open Market Committee (FOMC) events through the course of the year. Regularly scheduled and special meetings of the “Fed” can influence trading.
Traders can learn to understand how to anticipate FOMC news, how to trade around Fed announcements, and how to weave all this into your trading strategy.
There is no “one way” to trade a Fed event – each event is unique.
What is important is how traders prepare for the events.
Traders should know dates of the events and brush up on technical skills in order to avoid being blindsided by sudden market movement spurred by Fed action or market reaction. An internet search will show Fed events and dates.
Traders can include Fed events on their trading calendars and regularly update these dates and times.
Be prepared for upcoming events
Fed events – announcements, comments, or decisions – can be followed through press releases and the release of Fed notes, or minutes, from the event. Market response to these actions can be swift, so traders should be prepared.
Prepare for upcoming events by adding your own notes based on the description of the event and reports of Fed action. Fed events also include the non-farm payroll, the FOMC statement, and press conferences.
Simpler’s traders follow Fed calendar events and the corresponding technical analysis of the charts. Traders should lead into information in the charts and not let outside “media” information or opinions influence trading plans.
(Check out the video, above, for insight into trading this changing market.)
What does the market know about Fed events?
As the market goes into a Fed event, traders should consider how effectively the market has already “priced in” the event and how it might affect market movement.
Perceptive traders can anticipate market movement prior to an announcement or event where the market has essentially “baked in” market response. What that means is that the market has already had time to digest the upcoming event and any influence from the event.
Keep in mind that whether information from the event is new or expected, the anticipation of any Fed event has already impacted the market movement or price action.
The concept of trading Fed events essentially centers around the information that will be revealed to the market at that time. Is this new information? Is this information the market has seen before? Or could something new happen from it?
For example, when the market appears to know what is going to happen at a Fed announcement, the event doesn’t jolt the market into a panicked response. This is especially the case when an announcement was anticipated months earlier. In a case like this, a Fed event can actually be a non-starter for any sudden market moves.
On the flipside, unexpected Fed information or announcements can cause chaos. At this point traders should embrace technical analysis within their current trading plan.
Learn to anticipate market reaction
In some cases, traders can anticipate market reaction to a Fed event.
If a market is technically bullish, traders could assess that the announcement or information is already baked into the market. This could be the case if the market is heading into the event with heavily bullish technical signals.
By contrast, sudden changes in the charts may signal increased volatility or fast changes in price action after the Fed event. If traders expect volatility or sporadic movement in the market they can take precautions.
Ultimately, traders need to know how to find and plan for Fed events and then evaluate how much of the information is already known or anticipated by the market.
There isn’t a one-size-fits-all way to trade Fed events because each event can vary widely in its effects. Understanding how to approach events and preparing trading strategies will result in a more structured approach to trading these potential opportunities.