FOMC Blog from Today

Discussion in 'Trading' started by Spectra, Jan 31, 2007.

  1. Jan 31, 2007 Wed Morning Session - Fed Day by Jason Chan

    January 31st, 2007

    The first hour of trading was very sideways and unexciting, which is to be expected in the time preceding Fed Day announcements (we will have the announcement at 2 PM EST today). We had two decent Official Room Call triggers this morning. MaxSpan (our 15 min opening range breakout/breakdown trend following system trade) again proved its effectiveness, despite skepticism that it might not work on Fed Day, which tends to have less volatility in most of the day preceding the announcement. CajunSniper issued the call slightly before his automated trading system kicked in to give us a heads up to enter the trade at 10:33:50 AM. MaxSpan was again profitable today reaching its +10 initial target on its first 2/3 and stopped out on its trailing 1/3 for -6, with only one stop in 17 trading sessions. We got an an overbought trigger short at 10:43:19 AM EST while MaxSpan was still alive (still trailing its remaining 1/3 position) from a market entry price of 12592 with stop of 12607 and target 1 of 12585. A downside target 2 of 12577 was announced with the heads up that target 2 would be reached if 12584 cracked. Both targets were achieved, which would give those who stuck with target 1 +7 points and those who trailed for target 2 +15 points. At worst, room members got +3 if scaling out or cutting their position near the daily R1 pivot level. MaxSpan stopped out of its remaining 1/3 trailiing portion after the trigger target 1 12585 was hit and before the trigger target 2 12577 was hit.

    Note that we did get the volatility expansion we expected after yesterday’s NR-7 day (”narrow range seven” day) as today’s daily trading range is 91 points as opposed to the 61 points of yesterday. However, today’s trading so far can not really be considered trendy. This of course could change after the Fed announcement at 2 PM EST which could move the market strongly to one side or the other. So far, our stance has been cautious, as Alex warned us on market open to not overtrade on this Fed day, especially for the newer traders. Remember to cut back on the number of charts and applications running on your mission critical trading platforms before the Fed announcement is issued, so that your machines do not lock up. New traders should not be playing the Fed announcement reactions, as they can hurt you badly. If you have not already, check out our previous two Fed Day relating trading videos:

    CajunSniper’s Video on playing the Fed Reaction:

    Alex’s Advice Preparing Us for a Dec, 2006 Fed Move (my machine locked up and I accidentally found myself in a trade, which goes to show you the importance of streamlining your trading platforms on Fed Day):

    Jan 31, 2007 Wed Afternoon Session - Fed Day
    January 31st, 2007

    After the Fed meeting, the market resolved itself to be powerfully bullish. We only had one Official Room Call signal for the afternoon, which was an overbought trigger short issued at 2:39:26 PM EST from a market entry price of 12561 and initial stop of 12581, playing an exhaustion of the up-move. Note that this would be considered a risky short as it was against extremely bullish filters, which means that you should have used light contracts. The target 1 of 12556 was achieved at about 2:53 PM EST on the second reaction down after the highs were re-tested and failed, giving one 5 points on the trade if entering at market and sticking with target 1. There were several non-official trades announced, but mostly for illustration due to our cautious stance for the Fed reactions trading. We did get our high volatility trending day today after our NR-7 (”narrow range seven”) day yesterday as the YM (Dow e-mini) has closed near its highs, above the daily YM R3 pivot level, forming a long green bar with a huge 174 point range. Closes above the R3 daily pivot level are rare, as is breaking through the R3 level to begin with. According to the cycle theory of volatility, normally we should expect a narrower range trading day tomorrow with choppy price action, after having had a trending, high volatility day such as today. However, per Alex, due to some important economic announcements being issued tomorrow (Thursday), the price action might still have some nice volatility.
  2. this was supposted to be posted in journal forum--moderator please move
  3. Magna

    Magna Administrator

    Hi Spectra,

    Please see PM.