Taking Advantage of Choppy Fed Day Trading

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Every time Bernanke and the Feds are set to make a rate announcement, we have a brief meeting within our firm to discussing how we are going to trade. Whereas last fall we saw some huge directional moves on rate decisions, on several of the recent Fed days we’ve experienced extremely choppy action. The market will appear to be breaking down, only to reverse and make a new high. Or the market will appear to be breaking to the upside, only to reverse course and close at the low.

Today once again proved to be one of those choppy Fed days. After 2:15pm when the announcement was made, the SPY made both a new intra-day low and a new intra-day high within about 30 minutes. When I see this kind of action in the market, instead of trying to pick direction, I just look for excellent risk/reward setups. When the SPY made a new high above 106.25, but failed to breakout to the upside, I thought there was a good risk/reward short in the market, specifically in the financial sector, which was showing relative weakness all day.

Sometimes we can get tossed around in a choppy market, but as flexible day traders often we can use the choppiness to our advantage. The key is to focus your energy on finding risk/reward trades, regardless of the trend of the market.

Best of luck with your trading! Don’t forget to follow us on Twitter.

SPY 11-04-09

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