How To Trade FOMC Meeting Minutes Release Each Month?

FOMC stands for Federal Open Market Committee. FOMC Meeting takes place each month in which all the regional governors and the FED Chairperson participate and decide on the future course of the monetary policy. At the end of the FOMC Meeting, the minutes are released and a press conference is held. If you are a trader of EURUSD, GBPUSD, NZDUSD, AUDUSD, USDJPY, USDCHF and USDCAD, then you must keep an eye of what happened in the FOMC Meeting. You can explore the Federal Reserve site and read more about these FOMC Meeting schedules and the press conference that followed them.

The decisions made in in these FOMC meetings can start new trends that can last for many weeks. This is precisely what has happened with the last meeting. Even though the decision was to keep the interest rates unchanged, EURUSD, GBPUSD, NZDUSD, AUDUSD have all move up 200 pips while USDJPY, USDCHF and USDCAD have all moved down 200 pips. Always keep in mind when you are trading these USD pairs you should keep an eye on what FED is doing.  Whenever FED makes an important monetary policy decision, these pairs move in unison. Why? They all have USD either on the base side or the counter base side.

FED, ECB, BOE, SNB, BOC and BOJ Are The Most Important Players

Now keep this in mind central banks are the most important players in the market. Central banks have the potential to move the market up and down big time. Just last year, Swiss National Bank surprised the market by unpegging Swiss Franc with EURO. The decision was so unexpected that it bankrupted many traders and brokers. You can read this post that explains in detail what happened on that day. Swiss National Bank was much criticized for its decision. Some called it amateurish. Many traders got their accounts blow when the stop loss did not function. Why didn’t the stop loss function? There was so much buying pressure on CHF that no one was willing to take the other side of the trade. So keep this in mind under extreme conditions of market volatility, stop loss maybe of no help to you. Whatever, always keep an eye on the central banks when you are trading a pair.

One simple approach is to close all the trades when something important is scheduled by the central bank. We have seen market move up 500 pips in 2 hours after an FOMC Meeting and then move down 300 pips in the next few hours. So it is always a tricky thing how to trade these meeting. Last time the market didn’t show any reaction and just didn’t move at all on FOMC Meeting. So you never know what the market reaction will be. Market analysts are always watching the FED closely for clues about its monetary policy. Last year a FED economists by mistake released the rate hike decisions well before time.

So nothing happened when the rate hike was announced. Why? Market was expecting the rate hike for the last 2 months so it had already been compounded into the price. There was no reaction when the announcement was made as the surprise had already by taken away.

How To Trade FOMC Meeting Minutes Each Month?

As said above sometimes the market moves big time and sometimes there is no reaction by the market. When you trade FOMC Meeting Minute release as well as the NFP Report release always look at all these pairs EURUSD, GBPUSD, NZDUSD, AUDUSD, USDJPY, USDCAD and USDCHF. You will find that some pairs will give you a very clear signal that will tell you about the direction in which the market is going to move. This signal can appear 4-6 hours before the actual meeting minutes release. Why this happens? Some participants in the market have more knowledge than the rest of the market so you will find that reading the charts will give you the clue in which the market is expected to move. Take a look at the following USDCAD H4 chart.

FOMC Meeting

You can see a strong doji sell signal just 4 hours before the meeting appears on the USDCAD H4 chart. The risk is 40 pips. Market has moved down more than 400 pips. You can think that BOC is much more informed about what the FED is going to do as compared to other banks. This signal gave us the clue that GBPUSD, EURUSD, NZDUSD and AUDUSD will move up while USDCAD, USDJPY and USDCHF will move down. This is precisely what happened. Take a look at this NZDUSD H4 chart below.

FOMC Meeting

In the above screenshot you can see the very big H4 candle that is formed just after FOMC Meeting Minutes release and the press conference. Red arrow in the above screenshot is the entry. You can see in the above screenshot that market took more than 1 week to fall to this level and it took just 12 hours to recover all the loss made by NZDUSD. Take a look at this NZDUSD H1 chart below.

FOMC Meeting

This is the hourly chart. Red arrow is showing you the entry. The risk was only 20 pips and the market has moved more than 250 pips. So you can well imagine, trading central bank press conferences can be a highly rewarding experience if you know how to trade them properly. As said above sometimes stop loss stop working  as that happened last years when SNB made the unpegg decision. So you never know. But most of the time you should expect the stop loss to keep working.

Candlesticks Patterns Are Very Important In News Trading

Trading FOMC Meeting Minutes, ECB Press Conference, NFP Report or BOJ Monetary Policy Statement are know as news trading. Candlestick patterns are very important when you trade the news. Read our last post in which we explain detail how you are going to use candlestick patterns in determing the entry and exit. You just need to look at these candlestick patterns to determine in which direction the market is going to move. We don’t believe in using a buy and sell pending orders. Market direction is almost clear just a few hours before the news release as some market participants have more information than the rest of the market so they start selling or buying in anticipation of the market move. This buying and selling results in a candlestick pattern that gives you the information what the market direction is going to be. All you need is candlestick pattern mastery if you want to become a successful news trader. Just look at the above screenshot shots and you can see all our signals are based on these candlestick patterns.