#11– 16.09.2014
FOREX
TRADING TIPS:
HOW TO PREPARE FOR THE FOMC DATA TOMORROW
17th September 2014
Tomorrow sees probably the most important FOMC meeting statement since Janet Yellen replaced “Helicopter” Ben Bernanke as the FED chair.
October sees the end of Quantitative Easing, the printing presses come to halt and the “namby-pamby” support to Wall Street comes to a halt. The FED announced some considerable time ago that their monetary policy was changing and that instead of easing they would be tightening. It has taken months for this policy change to resonate with Wall Street who to this day believe that the FED will always support them in their continuing eight year support of a bull run in equities making the “FAT CATS” on Wall Street richer whilst Main Street has suffered.
Nonetheless, the realization of a FED Policy change is now just about hitting home as it is widely expected that Janet Yellen will change her written statement to talk about a beginning of a timetable for raising interest rates. The FED has been criticized in some quarters of late as being way behind the curve based upon the recent releases of economic data in the U.S.
Basically, tomorrow, nothing is guaranteed, I like everyone else does not know the content of Yellen’s Press Statement that she will re-read and support the data contained therein at her Press Conference. All I have to go is the data and the San Francisco FED documents basically leaked to alert the markets that sentiment was about to change.
Will it be changed?
I do not know but I feel that this is the time to do it when she has the Press Conference.
As an active Forex trader what am I going to do?
MY PLAN WITH EXISTING OPEN TRADES:
Right now my LIVE trades are as follows: -
1. AUD/USD – Short
2. NZD/USD – Short
3. USD/ CAD – Long
4. AUD/NZD – Long
5. GBP/NZD – Long
I have no limit orders or stop orders in position with my brokers and I WILL NOT be placing any.
Trades 4 and 5 are longer-term trades. The only decision that I have to make on these two trades is do I close my GBP/NZD trade ahead of the Scottish Referendum vote this Thursday. Both these trades I will leave open. They are small position sized trades well within my RISK TOLERANCE and RISK MANAGEMENT guidelines within my TRADE PLAN.
Trades 1, 2 and 3 if I am able to protect my profits with a stop ahead of the FOMC I will otherwise I will managed risk and close them ahead of Yellen.
I am a LOW-RISK trader and do not see trading as gambling. If I wanted to gamble I would go to Las Vegas. My credit balances on broker accounts are paramount to my longevity and longer-term success as a trader. I will not jeopardize this because of banking a 50 or 100 pip loss. If the FOMC statement is not in line with my trades my loss could be more than double what it was prior to the data release.
MY PLAN TO ENTER NEW TRADES:
With my decision made regarding my open trades and how to deal with them, what about my reaction to the news event itself?
My pair that I will be initially focused is the EUR/USD:
If Yellen continues to be “DOVISH” there is a huge number of confluences around 1.3150 to 1.3200. I will be using this area to get short, as this is the direction that I believe that the EUR/USD is heading given the divergent approach between the FED and the ECB. One is tightening and the other starting to aggressively ease. My target short would be 1.2760.
If Yellen is as predicted “HAWKISH” the EUR/USD will fall. I do not like to chase but I will try to get an entry on a pullback within the move lower. There are always periods of consolidation when a pair falls and these are the opportunity areas to enter short. My limit will still be 1.2760 but my overall profitability may not be as high.
I will then look at AUD/USD, NZD/USD short trades as I would want to re-establish short positions again if Yellen is “HAWKISH” If she was “DOVISH” I would be looking at entries around 0.9150-0.9200 in the AUD/USD and around 0.8250 to 0.8300 with the NZD/USD.
These are simple plans but clear in my mind what I will be looking for and the order in which I will approach the news.
To summarize:
1. Make sure you have NO open orders with your brokers.
2. Deal with the open trades you have, protect stops or close or hold if they are NOT USD influenced. You may decide to close everything. Remember this will be a market-moving event.
3. Prioritize the trades that you want to look at after the data has been released.
4. DO NOT jump the gun. Be patient and wait. Let any knee-jerk reaction pass by first.
Good luck with the FOMC tomorrow.
Scott Pickering
The Pip Accumulator
FOREX
TRADING TIPS:
HOW TO PREPARE FOR THE FOMC DATA TOMORROW
17th September 2014
Tomorrow sees probably the most important FOMC meeting statement since Janet Yellen replaced “Helicopter” Ben Bernanke as the FED chair.
October sees the end of Quantitative Easing, the printing presses come to halt and the “namby-pamby” support to Wall Street comes to a halt. The FED announced some considerable time ago that their monetary policy was changing and that instead of easing they would be tightening. It has taken months for this policy change to resonate with Wall Street who to this day believe that the FED will always support them in their continuing eight year support of a bull run in equities making the “FAT CATS” on Wall Street richer whilst Main Street has suffered.
Nonetheless, the realization of a FED Policy change is now just about hitting home as it is widely expected that Janet Yellen will change her written statement to talk about a beginning of a timetable for raising interest rates. The FED has been criticized in some quarters of late as being way behind the curve based upon the recent releases of economic data in the U.S.
Basically, tomorrow, nothing is guaranteed, I like everyone else does not know the content of Yellen’s Press Statement that she will re-read and support the data contained therein at her Press Conference. All I have to go is the data and the San Francisco FED documents basically leaked to alert the markets that sentiment was about to change.
Will it be changed?
I do not know but I feel that this is the time to do it when she has the Press Conference.
As an active Forex trader what am I going to do?
MY PLAN WITH EXISTING OPEN TRADES:
Right now my LIVE trades are as follows: -
1. AUD/USD – Short
2. NZD/USD – Short
3. USD/ CAD – Long
4. AUD/NZD – Long
5. GBP/NZD – Long
I have no limit orders or stop orders in position with my brokers and I WILL NOT be placing any.
Trades 4 and 5 are longer-term trades. The only decision that I have to make on these two trades is do I close my GBP/NZD trade ahead of the Scottish Referendum vote this Thursday. Both these trades I will leave open. They are small position sized trades well within my RISK TOLERANCE and RISK MANAGEMENT guidelines within my TRADE PLAN.
Trades 1, 2 and 3 if I am able to protect my profits with a stop ahead of the FOMC I will otherwise I will managed risk and close them ahead of Yellen.
I am a LOW-RISK trader and do not see trading as gambling. If I wanted to gamble I would go to Las Vegas. My credit balances on broker accounts are paramount to my longevity and longer-term success as a trader. I will not jeopardize this because of banking a 50 or 100 pip loss. If the FOMC statement is not in line with my trades my loss could be more than double what it was prior to the data release.
MY PLAN TO ENTER NEW TRADES:
With my decision made regarding my open trades and how to deal with them, what about my reaction to the news event itself?
My pair that I will be initially focused is the EUR/USD:
If Yellen continues to be “DOVISH” there is a huge number of confluences around 1.3150 to 1.3200. I will be using this area to get short, as this is the direction that I believe that the EUR/USD is heading given the divergent approach between the FED and the ECB. One is tightening and the other starting to aggressively ease. My target short would be 1.2760.
If Yellen is as predicted “HAWKISH” the EUR/USD will fall. I do not like to chase but I will try to get an entry on a pullback within the move lower. There are always periods of consolidation when a pair falls and these are the opportunity areas to enter short. My limit will still be 1.2760 but my overall profitability may not be as high.
I will then look at AUD/USD, NZD/USD short trades as I would want to re-establish short positions again if Yellen is “HAWKISH” If she was “DOVISH” I would be looking at entries around 0.9150-0.9200 in the AUD/USD and around 0.8250 to 0.8300 with the NZD/USD.
These are simple plans but clear in my mind what I will be looking for and the order in which I will approach the news.
To summarize:
1. Make sure you have NO open orders with your brokers.
2. Deal with the open trades you have, protect stops or close or hold if they are NOT USD influenced. You may decide to close everything. Remember this will be a market-moving event.
3. Prioritize the trades that you want to look at after the data has been released.
4. DO NOT jump the gun. Be patient and wait. Let any knee-jerk reaction pass by first.
Good luck with the FOMC tomorrow.
Scott Pickering
The Pip Accumulator
