This is How to Profit Off a Fed Event
Today we had a pretty easy trade on the markets.
The Q’s shot up to $295.75, tested the multi-day VWAP, and then sold off just before 10:00 am breaking VWAP to the downside.
Following that break, it eventually made a turnaround later in the day and could have been played to the long side.
But at 1:30 pm, I sold all of my positions and went completely into cash.
Did I see something in the chart I didn’t like?
Was there something the VWAP was telling me?
Was I going to play pickleball and needed to cash out on profits?
No. None of that.
In fact, the reason I exited all of my positions was because of the Fed minutes that were to be released at 2:00 pm.
And like any Fed event, this one was bound to make the markets react violently to the news — no matter what that news was going to be.
I treat Fed events like an earnings report.
We wait for the first candle to hit, we let the markets cool off just a little bit and then we strike.
Just like an earnings report, you never want to trade the first candle. That only creates a range for you to eye.
So this is how we played it today…
HOW TO TRADE A FED EVENT
The first thing I must stress again is we had no positions going into this. And the second crucial thing we did is we waited and didn’t react to the first candle.
It only took waiting a minute or two for the market to make its mind up.
We allowed the price of the Qs to get back to VWAP, saw that it wasn’t breaking but bouncing off the VWAP line, and were bullish and in at $294.50.
Then, if you sold into the move up and got out as it was rolling back over, you could have made a quick trade.
The entry and exit points can be seen in the graph below…
That was a 2-minute trade.
If you were following along with my call, you could have done this yourself as well. Don’t think that it’s not possible.
Just look what two of the people in chat did with this quick-minute trade…
I didn’t trade the first candle. I let the VWAP tell me what to do. And then I pounced and hundreds of other people watching followed my lead.
I saw a person in chat say that “the first move is often times the right one”.
Well, I’ll be honest. I’ve been in this business for 30 years and I can tell you that the first move is not the “right” one.
It’s always a knee-jerk reaction with no bearing on what actually was released.
Do you honestly think that within ten seconds of the minutes being released that traders understood the whole release with all the details?
The Fed Minutes is a 13-page paper that is thick with detail, very verbose, and very technical.
And you actually have to read it.
They don’t have any pretty graphs or pictures. This is the Fed we’re talking about.
The best you’ll get out of them is bullet points on page 12.
If you were holding stock or options going into this event, you would have been chopped up.
While this wasn’t the most violent reaction I’ve ever seen, the market still had a three-point swing back and forth in just 15 minutes.
Don’t be a bag holder in this market. Trade on price, and what you see.
And always remember, if the Fed is having an event, or big economic data is dropping, get the heck out of your positions.
If you were caught off guard by this event, I suggest adding an econ calendar of some kind to your bookmarks.
I particularly like this one from FXStreet.
They mark what events will have a higher impact on the markets, so you know every day which events you may need to pay attention to.
That’s all for now. I’ll see you tomorrow morning!
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3 responses to “This is How to Profit Off a Fed Event”
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February 23 2023
Hey Kenny, Copper Joe here. I did it again after the Q’s started to drop I bought my put forgot to set my stops went out to do chores came back, and guess what I was upside down. Again. I’m a slow learner but getting there. Any advice would be great.
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