; The Dow, the Fed and your expectations
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The Dow, the Fed and your expectations


The releases of economic announcements inject volatility into the futures markets on a regular basis. Perhaps the single most volatile event occurs when the Federal Reserve's Federal Open Market Committee (FOMC) releases a statement about adjusting the Federal Funds rate. The relationship between the E-mini Dow futures (YM) and the Fed announcements from 2007 to present establishes certain trends. These trends are useful in framing a strategy to trade the YM starting a week before the announcement through the release of the data. In the week leading up to a Fed meeting, the historical trend is for the YM to trade in an increasingly contracted range. To apply this information into a strategy, traders need to recognize the current market conditions starting the week before the scheduled announcement. When the announcement is made, volatility sets in and price whipsaws. Novice traders who attempt to trade their bias rather than the cart will get stops triggered during this period.

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