« Alert: Yen and Dollar pairs breakout to fresh highs on the day once again! | Home | This indicator seems to think that the economy may be beginning to turn around. »
All Financial Markets are Reasonably Quiet Before Tomorrow’s Fed Announcement.
By Sean Hyman | March 17, 2009
Words of Wisdom to the Trend Trader as well as the Range Trader:
One thing that the trader always has to ascertain is when to be “in” the market and when to be “out” of the market. Since most market participants (in any market) are “trend traders” whether long term investors or short term intra-day momentum traders, either way….it bodes well for these types to not be taking on any “new” positions in the markets.
This is why you will find the forex market and the stock market will typically have “dull” days right before the Fed announcement of interest rates tomorrow. To be more specific, the day before the announcement and the day of the announcement (up until about 2:15pm EST when its announced), the days will traditionally be “dull” and have a lack of momentum.
This makes sense because if you were a huge hedge fund manager, would you want to buy millions of shares of stock or buy up billion s of units of currency right before a Fed announcement? Heck no! And it’s the “big money” that moves these markets…not the “moms and pops” of the world.
Therefore it’s best for the trend traders to bow out of the markets during these days until the “verdict” of rates are known.
Now, with that said, for the range trader that likes sideways, dull, low volatile ranges…it can be a “sweet spot” for them. However, even they have to realize that spreads in many markets will be wider and fills not quite as good as usual due to the less amount of volume going on in the markets. However, the fills are still usually no problem in the forex market.
So if you are a “trend trader”, you may want to “lay low” in the forex market until well after the rate announcement. Remember, that the first moves that are made in the market are not always the “right” ones because it’s the retail speculators that feel they need to be the first ones back into the market.
Typically, the big institutions will fully read over any Fed comments and take some time to think things through. This also allows the volume to come back into the market by the time they put on their positions sometimes an hour or so later. The moves that you see long after the announcement tends to be the “true” move.
If you are a “range trader” then, tread carefully and become picky about your entry points. Be sure to be out of the market around when the Fed announces rates, because this is when “breakouts” against you are most likely to occur.
Get your demo and live accounts opened up before the Fed meets on interest rates tomorrow.
Get your practice account by clicking on the “Practice Trading” tab above. This way you can have FREE, real time access to the currency market to see what it is like or click here: http://www.fxedu.com/practice-forex-account
If you want to learn more about this market, go here to get the most knowledge for the least expense and most convenience: http://www.mywealth.com/currency-trading.php
For those of you who are at the point to where you are ready for a live account, start with a micro or mini account here: https://secure2.fxcorporate.com/fxtr/?plugin=0&locale=en_US_FX_EDU_LLC
Sean Hyman
Tags: account, blog, breakout, currency, currency market, demo, fed, forex, forex market, forextrading, fx, fxedu, interest rates, invest, investor, live, momentum, money, mywealth, practice, practice account, rate, Sean Hyman, spot, trade, trader, trend
Topics: What To Look At In The Market | No Comments »