How to Trade the Fed’s News Yesterday…

How to Trade the Fed’s News Yesterday…

Posted On April 29, 2021 2:18 pm

Unless you are living under a rock you’ve heard that the Fed, unsurprisingly, voted to continue with bond-buying and holding rates at near zero for the time being. 

On a personal note, I think it’s misguided and stinks of politics rather than what’s best for the long-term economy.  But frankly, what I think doesn’t matter. We need to trade the market we have according to the rules they lay down for us.

As the Citibank banker said, you gotta dance when the music is playing. 

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To use a metaphor from our childhood days, I know playing musical chairs can be uncomfortable when the music is going faster and there are fewer chairs to sit in.  But don’t worry, I can assure you that Armageddon isn’t upon us. 

So how do you trade a market with ever-increasing liquidity?  

First, you understand that the market is more volatile (which is why I wrote about the VIX yesterday) so we want to look at shorter-term trades.

That allows us to “stick and move” – meaning we can make small quick wins in the short term rather than getting caught up in some long-term trade that could quickly move against us. 

That is exactly the strategy we started following in Options360 a few weeks ago.  

The nice thing about shorter-term trades is that we never overload the boat so that when the market reverses we aren’t wiped out.  With this much liquidity, the market can change direction in a dime.  We saw that last year when the longest bull market in history gave way to the shortest bear market in history.  

The bottom line is, lots of companies are doing fine.  We just need to pick and choose our positions wisely.  

Remember, it’s a bull market until it isn’t.  And when it isn’t we can make even more money faster!

Taking philosophical positions is fine, but when it comes to trading don’t ever let your opinions get in the way of the facts!

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To Your Success,


About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.