Fed preview: three scenarios and how I'd trade each
The decision lands on the 29th. Here are the three outcomes I think are possible, what each would do to the tape, and the plan I've written down for each so I'm not deciding live.
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I write this note before every Fed meeting because the worst trades in my journal all happened in the hour after a statement. Deciding in advance fixes most of that. The meeting is still two weeks out, which is exactly when I want to write it: before the noise starts.
Scenario one: hold, statement unchanged (most likely)
The market has priced this. Expect a chop, then a drift in the direction of the prior trend, which is up. Plan: do nothing for the first thirty minutes, then trade the existing setups as normal.
Scenario two: hold, but the statement hints at the next move
A hawkish hint would hit long bonds first and the rate-sensitive groups second. A dovish hint does the reverse. Plan: no new positions that day. Wait for the next morning’s open, which tends to be the honest reaction.
Scenario three: a surprise
Rare, and I don’t try to trade it. Plan: close anything that is not working, keep what is, and reassess after the press conference.
The one rule
Whatever happens, I do not add risk in the first thirty minutes after the release. That rule has paid for itself many times over.