FOMC May Rock Your World!

Since rock hit the airwaves, there have been bands that have used initials for their names. Groups such as ABBA, Run DMC, R.E.M., U2 or ZZ Top may come to mind. While the letters FOMC do not bring a rock band to mind, when Janet Yellen speaks, it may rock your trading world! As Chairman of the Fed, she has more influence over the US dollar’s value than any other person does. Her comments can determine a short-term trend, either positive or negative.

Although sometimes referred to as “The Fed”, FOMC stands for Federal Open Market Committee and consists of the Board of Governors of the Federal Reserve System. It consists of 12 members and they hold eight regularly scheduled meetings throughout the year.

A visit to the Federal Reserve System website informs the public “The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.” [1]

Iron Condor Strategy
Since this news report can rock your trading world, there are a variety of trades possible all implementing the Iron Condor strategy on several different Nadex Spreads. An Iron Condor strategy works well in this situation because movement is expected, but the direction of the movement is unknown. When executing this trade, you will buy a lower spread with the ceiling where the market is trading at the time and sell an upper spread with the floor where the market is trading at the time, having the floor of the upper spread equal to the ceiling of the lower spread. Because of the volatility of the markets, it is wise to be very careful with theses trades and use extreme caution.

Start Trading This News Event As Early As 11:00 AM ET
The US FOMC and Feds Funds Rate news report is being released at 2:00 PM ET on Thursday, September 17, 2015. The following charts will help you see entry times, expiration times, the applicable market/instrument and minimum profit.

Expect more volatility with contracts expiring at 3:00 PM since the report will have been released at 2:00 PM.  There is a high probability of a rate change which will cause massive swings in all markets.  Exercise extreme caution.

Federal Interest Rate Decision
Since the FOMC members vote where to set the interest rate, a higher than expected rate is positive for the USD. If it comes out lower than expected, it is considered negative for the USD. The interest rate is forecast to be 0.38 percent. It was previously at 0.25 percent.

There are many other exciting strategies and systems to help you in your trading day. Visit www.apexinvesting.com to see what is available for free and to experience traders helping traders.