Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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It’s that time of the year where December contract is the front month for all stock indices/ currencies/ financials and other markets!
Tomorrow we have FOMC.
Normally the volatility is around the actual rate cut/increase….This time it is 99.99% of no change
However, FOMC days do have unique behavior and this time my guess is, it will be around the language used after the announcement.
The following are my PERSONAL suggestions on trading during FOMC days:
· Reduce trading size
· Be extra picky = no trade is better than a bad trade
· Choose entry points wisely. Look at longer time frame support and resistance for entry. Take the approach of entering at points where you normally would have placed protective stops. Example, trader x looking to go long the mini SP at 3325.00 with a stop at 3319.00, instead “stretch the price bands” due to volatility and place an entry order to buy at 3319.75 and place a stop a few points below in this hypothetical example ( consider current volatility along with support and resistance levels).
· Expect the higher volatility during and right after the announcement
· Expect to see some “vacuum” ( low volume, big zigzags) right before the number.
· Consider using automated stops and limits attached to your entry order as the market can move very fast at times.
· Keep in mind statement comes out at 1 Pm Central time, the news conference which dissects the language comes out 30 minutes later so the volatility window stretches out.
· Know what the market was expecting, learn what came out and observe market reaction for clues
· Be patient and be disciplined
· If in doubt, stay out!!
Find the clues?
Daily chart of Bean Oil futures below along with a graph showing the changes in the Non- Commercial long/short difference (weekly basis).
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Posted in: Future Trading News