Be Prepared for the Release of the FOMC StatementBy Annie Reona | Tuesday, July 28th, 2015
Eight times throughout the year, the Federal Open Market Committee (FOMC) meets to discuss the overall state of the economy and to decide on interest rates. History has shown that the release of their decision nearly always stirs up the markets, making it a great time to get some trading in, particularly in the Forex markets.
The forex markets that are most changed by the release of the FOMC Statement are AUD/USD, EUR/USD, GPB/USD, USD/CAD, USD/CHF, and USD/JPY. This is because the interest rate that will be voted on and that could potentially change is the Federal Funds Rate, which is what banks use when lending balances to other banks which are being held at the Federal Reserve.
Both the Federal Funds Rate and the official FOMC Statement will be released on Wednesday, July 29, 2015 at 2:00 PM ET. Analysts that have studied the trading trends that follow the releases of these statements have determined that an Iron Condor strategy using Nadex spreads is the most preferred. A Nadex spread is preferred because of its defined limited risk.
Keep in mind as the trading begins that the changes in the market are usually rapid and only remain for a short period of time. When the Iron Condor strategy is set up correctly and the trader is prepared for the fluctuations in the market to occur and then the normalization of the market, they can profit greatly during this brief period of time.
The Iron Condor strategy involves setting up two trades at once, one as a ceiling and one as a floor. The benefit of this strategy is that so long as the trade expires within that range, the trader profits. This is because the lower trade will profit if the trade expires higher and the higher trade profits if the trade expires lower.
This type of strategy greatly reduces risks and allows traders to increase their profits. When it comes to trading after the release of the FOMC statement, this strategy will allow traders to make the most profit as the market normalizes because the trades will likely expire somewhere in the middle of the spread, which means both the lower trade and the higher trade will be at the maximum profit level.Published in News & Analysis