FOMC Forex Trading Strategy

We’ll be treating a simple forex trading that can be used in trading the FOMC meeting minutes.

Howbeit, it is an awesome strategy that can be used by intraday traders.

What is the FOMC?

The FOMC is an acronym for Federal Open Market Committee and is a branch of the U.S. Federal Reserve that pilots the direction of monetary policy.

The FOMC meeting minutes gives investors a precursor to interest rates decisions by the U.S. Federal reserve and has become one of the most awaited event risks on the data calendar for U.S. Dollar and its related pairs.

There are eight scheduled meetings each year for the FOMC.

The minutes of frequently slated meetings are out 3-weeks following the date of the policy release.

The time for the release of the data is critical for this strategy and although this may differ over the period, it is usually scheduled for 07:15 GMT i.e. 02:15 EST.

Dates and time of the FOMC meeting statement is found on the Federal Reserve website.

Chart Setup

MetaTrader4 Indicators: Exponential Moving Average (21), Exponential Moving Average (200)

Preferred Time Frame(s): 1-Minute, 5-Minutes, 15-Minutes

Recommended Trading Sessions: After FOMC release

Currency Pairs: Majors

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FOMC Buy Trade Example

FOMC-forex-trading-strategy

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy position when the following chart or indicator pattern are in display sequel to the release of the FOMC meeting minutes:

  1. Upon the release of the FOMC meeting minutes as shown on Fig. 1.0, we’ll find an initial on directional big move – as shown on the candle labelled A. This initial move in the market is tagged as the true direction of the trend, but it is advisable not to initiate an entry order just yet.

N.B. The latest policy statement from the Federal Reserve is due at 2 p.m. EDT (18:00 GMT). This is expected to come along with updated economic projections and Fed Chair Janet Yellen is billed to hold a press conference at 14:30 EDT.

Our direction is to hold until after the speech from Janet Yellen, in which we saw a downward spike as shown on Candlestick B.

Candlestick C is out entry candle having seen that price has been able to maintain above EMA (21) and EMA (200).

Basic Entry Rule: Initiate a buy if price is aligned above both the EMA (21) and EMA (200) after the scheduled FOMC Statement and FOMC Press Conference.

Stop Loss for Long Entry: Place stop loss 2 pips below the most recent support area.

Exit Strategy/Take Profit for Long Entry

The following exit or take profit precaution should be taken:

  1. Ensure you have an effective trailing stop in place, this will enable you lock in profits in the event things get crazy.
  2. If by any means you’re still in the market and a bearish candle closes below the EMA (21), it is an indication that the trend is slowing and an exit or take profit

Sell Entry Rules

Enter a sell order when the following happens:

  1. If price bars is trading below the EMA (21) and EMA (200) after the scheduled FOMC Statement and FOMC Press Conference.

Stop Loss for Sell Entry: Place stop loss 2 pips above the most recent resistance area.

Exit Strategy/Take Profit for Sell Entry

The following rules or conditions will define an exit or take profit:

  1. If trailing stops are triggered by any sudden retracement hen following the trend.
  2. If a bullish candle closes above the EMA (21), it indicates a possible reversal in trend.

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About The Trading Indicators

The EA (21) and the EMA (200) are deployed to suit our analytical objectives by delivering more weight to the most recent data.

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