FXStreet send me a survey about the upcoming FOMC event, what I expect to happen and how the markets will react. In response to that, being a trader and not an analyst, here's what I think you should be aware of regarding such an event and how to approach it.
I think that if you don't have a specific plan for FOMC days, it's best to stay out of the markets. Especially if you're a day trader, for two reasons. First of all before the statement the markets are quite thin and usually there's not a lot of movement. Bad conditions to day trade as we need liquidity and movement to be successful as day traders. Now when the statement is actually released, volatility usually explodes with prices moving very fast while liquidity is very low. This often results in significant slippage when your orders get executed. This again are conditions not favorable for day trading.
The exception here is if you know what you're doing. This means you did your homework, looked at all kinds of statistics of what happens on FOMC days in the market you're trading. You know what kind of moves/volatility is likely to expect, what kind of orders to use to enter/exit trades and what position size will work for you in such a fast market. You also know where you can trade under such conditions, you don't want to trade at a broker that is likely to widen the spread by a crazy amount or whose platform might go down. In other words, you have a specific plan to execute that provides you an edge on FOMC days. If you don't have that, again just stay out and come back on the next trading day when the markets are back to normal.
If you're trading longer-term and have positions on, I suggest to make sure your stops, if you're using fixed stop-loss orders, are far enough away from prices to not get triggered by some knee-jerk reaction from the markets. On such days it actually often is a good idea to cancel any stop-orders and put them back after the event. But that's something every trader should test themselves depending on their strategies.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Editors’ Picks
EUR/USD retreats below 1.1800 following earlier rebound
EUR/USD loses its recovery momentum and trades little-changed on the day below 1.1300 in the second half of the day on Wednesday. The modest improvement seen in risk mood limits the US Dollar's gains and allows the pair to hold its ground.
GBP/USD clings to small gains above 1.3500
GBP/USD is posting moderate gains above 1.3500 on Wednesday. The pair edges higher as the US Dollar meets fresh supply amid a modest improvement seen in risk sentiment following US President Donald Trump’s first State of the Union address.
USD/JPY Price Forecast: Bulls await move beyond 156.00 amid constructive technical setup
USD/JPY attracts some dip-buyers on Wednesday and seems poised to appreciate further. Delayed BoJ rate cut bets undermine the JPY and offset a weaker USD, supporting the pair. The technical setup also favors bullish traders and backs the case for further appreciation.
Editors’ Picks
EUR/USD retreats below 1.1800 following earlier rebound
EUR/USD loses its recovery momentum and trades little-changed on the day below 1.1300 in the second half of the day on Wednesday. The modest improvement seen in risk mood limits the US Dollar's gains and allows the pair to hold its ground.
GBP/USD clings to small gains above 1.3500
GBP/USD is posting moderate gains above 1.3500 on Wednesday. The pair edges higher as the US Dollar meets fresh supply amid a modest improvement seen in risk sentiment following US President Donald Trump’s first State of the Union address.
Gold rises toward $5,200, supported by geopolitics and trade jitters
Gold buyers are back in the game, eyeing $5,200 and beyonf on Wednesday after seeing a correction from monthly highs on Tuesday. The US Dollar slips after Trump’s SOTU fails to impress and as AI-driven worries ease. Dovish Fed bets also weigh. Gold looks north so long as the key 61.8% Fibo resistance at $5,142 holds on the daily chart.
Bitcoin, Ethereum and Ripple post cautious recovery amid downside risks
Bitcoin, Ethereum, and Ripple are posting a cautious recovery on Wednesday following a market correction earlier this week. BTC is approaching a key breakdown level, while ETH and XRP are rebounding from crucial support levels.
Nvidia remains at the heart of the AI boom
Nvidia remains at the heart of the AI boom, with Q4 revenue projected near $65.6–66.1 billion, nearly 70% higher year-over-year. But investors are watching cash flow, leverage, and broader AI adoption. Growth is strong, but the AI stress isn’t over.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.