What to do ahead of the Fed meeting
Dave Floyd is a professional FX and stock trader based in Bend, OR and the
President of Aspen Trading Group. Dave’s approach to FX combines technical
and fundamental analysis that results in trades that fall into the swing
trading time frame of several hours to several days. For a free trial to
Dave Floyd’s Daily Forex Alerts
or call 888.484.8220 ext. 1.
FX markets are a bit on edge as one would expect
ahead of this week’s FOMC meeting. We have been up and down in some shorter-term
trades this week, with nothing to show for our efforts as the dollar turns on a
dime at any news items deemed relevant. This will likely continue until a very
clear path for future Fed plans is known.
Long-term readers know of my willingness to trade several of the lesser know FX
crosses – while this may be a bit out of the mainstream, consider this:
– all dollar based pairs are positively correlated; there is no such thing as
diversifying away the erratic price swings
– crosses are far less sensitive to dollar moves and presently are trading in a
more technical manner
– less noise – i.e. endure less ‘heat’ while waiting for your price objectives
to be met
My performance in January of 2006 is testament to the effectiveness of knowing
when to take shelter from the storm – crosses allowed my to post positive
returns for my clients, dollar based managers were chopped up badly. I am not
saying that crosses are the solution to whatever ails you as a trader, but to
not consider them is simply foolish. Below is a cross that is on my radar
screen.
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As always, feel free to send me your comments and questions.