A Memorable E-mini Trade From 2006

My love in the market is stock index futures. I trade stocks and options, but NOTHING comes close to stock index futures, in particular the ES (S&P 500 emini). Everyday I cannot wait to see what it brings to trade, but eight times a year I get that little extra adrenaline. Some of you have already guessed what event happens eight times a year and for the rest of you it is FOMC (Federal Open Market Committee meeting). There is nothing like the volatility that day brings for traders. Futures whip all over the place and with proper timing you can do very
well.

June 29, 2006 was the last meeting and it created a huge move. Ahead of the announcement I preset orders to buy at 1266 or to short at 1262. The buy filled and ran 11 points before stopping. I took 10 points and ran. Reloading the next trade off the pullback at 1271.50 and trailing the stop into the end of the day to close out at 1282 for another 11.50 points. Not staying in initially from the first buy is because history on FOMC days does not lead to a trend day, but this day was the exception so required a second entry in the same direction. In my nine years of trading that was a first and the market did not reverse or fade from the original reactionary move.

My targets are always set to take advantage of the volatility, and, not knowing which direction it will move, you have to be fast on the trigger or pre set orders. Several factors were leaning to a rally in the market for the last meeting with all the speculation of it potentially being the last rate increase… we were poised for a rally. However, because the market does not usually move in just one direction off the announcement it was a day to be adaptive. This meeting was Chairman Bernanke’s second showing and the market wanted to be finished and find reason to rally so it did for that day anyway.

There are timing tools like the TICK, oscillators and then basic Fibonacci to give you levels to see the index move to. But the best way is to let the announcement come out and know the targets ahead of time and go in as the TICK is moving. Certainly not a trade for beginners, but even beginners can take pieces out of the move and lock in a very nice day with very little risk. So anyone can enjoy FOMC and wear the party hat with all FOMC watchers.