Why Markets Move Ahead of Interest Rate Announcements 
Why Markets Move Ahead of Interest Rate Announcements
by InformedTrades
Video Lecture 61 of 77
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Date Added: May 7, 2017

Lecture Description

www.informedtrades.com/
A lesson on how markets and traders anticipate interest rate changes for stock, futures and forex traders.

Link to FOMC Rate Announcement: www.federalreserve.gov/newsevents/press/monetary/20080130a.htm

In our last lesson we looked at how The Fed is expected to react at different points in the business cycle, and what the expected market movement will be as a result. In today's lesson we are going to look at how the Fed goes about signaling to the market changes in their thinking on the direction of monetary policy, so we can begin to understand why markets react not only to Fed interest rate announcements but just as importantly to events which change the markets anticipation of how the Fed may react.

While we have simplified the situation in order to better understand the basics of how The Fed uses monetary policy, as you can probably tell by now, forecasting economic conditions and using monetary policy to try and manage those conditions is a very difficult process. The members of the FOMC are constantly analyzing economic data from across the country to try and gauge where the economy is in the business cycle and what if any monetary policy action is needed.

As we have touched on in previous lessons, the FOMC has 8 regularly scheduled meetings throughout the year where they meet to discuss current economic conditions and expectations of future conditions. It is at these meetings that decisions on what changes if any in monetary policy need to be made. Upon completion of these meetings a press released is issued an example of which you can see at the link below if you are watching this video on InformedTrades.com or in the description section if you are watching this video on Youtube.

www.federalreserve.gov/newsevents/press/monetary/20080130a.htm

As we've learned in previous lessons, what the FOMC decides to do with their target for Fed Funds Rate at this meeting has wide ramifications for the economy and therefore the markets. With this in mind the results of these meetings are closely followed by market participants. It is important to understand however that the market not only looks for whether or not the FOMC takes action on the Fed Funds Rate and by how much, but also for any clues in the Fed's Statement as to what their bias may be for future rate decisions.

This is a very key point to understand because the markets are always trying to anticipate what is going to happen and therefore they move up and down depending on what people think will happen to rates going forward. Anything that comes out from this meeting or any thing else that is in line with what the market expects should have little or no effect on the market. Conversely anything that comes out which changes the markets forecasts on what if any Fed action will be, can cause drastic moves in the markets as participants react to this new information and markets adjust accordingly.

Course Index

  1. Intro to Technical Analysis
  2. Introduction to Dow Theory
  3. Second 3 Tenets of Dow Theory
  4. How to Read Stock Charts
  5. How to Trade Support and Resistance
  6. Multi Time Frame Analysis
  7. Introduction to the Double Top and Double Bottom Charting Pattern
  8. How to Trade Double Tops Like a Pro
  9. How to Trade the Head and Shoulders Pattern Part 1
  10. How to Trade the Head and Shoulders Pattern Part 2
  11. How to Trade the Wedge Chart Pattern Like a Pro Part 1
  12. How to Trade the Wedge Chart Pattern Like a Pro Part 2
  13. How to Trade the Flag/Pennant Patterns Like a Pro Part 1
  14. How to Trade the Flag/Pennant Patterns Like a Pro Part 2
  15. How to Trade Triangle Chart Patterns Like a Pro Part 1
  16. How to Trade Triangle Chart Patterns Like a Pro Part 2
  17. Learn to Trade with Technical Indicators
  18. How to Trade Moving Averages Like a Pro (Part 1)
  19. How toTrade Moving Averages Like a Pro (Part 2)
  20. How to Trade the MACD Indicator Like a Pro (Part 1)
  21. MACD Indicator: Trade it Like a Pro (Part 2)
  22. How to Trade the Relative Strength Index (RSI) Like a Pro
  23. How to Trade Stochastics Like the Pro's Do
  24. The Difference Between the Fast, Slow and Full Stochastic
  25. How to Trade Bollinger Bands - Stocks, Futures, Forex
  26. How to Trade the Average Directional Index (ADX)
  27. How to Trade the Parabolic SAR
  28. How to Trade Candlestick Chart Formations Part 1
  29. How to Trade Spinning Tops and Doji Candlestick Patterns
  30. How to Trade the Bullish/Bearish Engulfing Candlesticks
  31. How to Trade the Hammer Hanging Man Candlesticks
  32. How to Trade the Morning/Evening Star Candlestick Pattern
  33. How to Trade the Inverted Hammer/Shooting Star Patterns
  34. Why Most Traders Lose Money and The Solution
  35. Why Traders Hold On to Losing Positions
  36. Two Trading Mistakes Which Will Destroy Your Account
  37. Herd Mentality is the Psychology That Leads to Big Trading Losses
  38. Profit Expectations: What Millionaire Traders Know
  39. How to Join the Minority of Traders Who Are Successful
  40. How To Determine Where to Put Your Initial Stop Loss Order
  41. How to Use the Average True Range (ATR) To Set Stops
  42. How to Up Your Chances for Profit When Setting Stops
  43. How to Reduce the Chances of Being Stopped Out on a Trade
  44. How Successful Traders Use Indicators to Place Stops
  45. Stop Your Mind From Causing You to Take Profits Too Soon
  46. How To Use Trailing Stops
  47. Why Position Sizing is So Important in Trading
  48. Why Fixed Position Sizing Is Not the Best Way to Trade
  49. Trading The Martingale and Anti Martingale Strategies
  50. How to Set Trade Position Size for Maximum Profits
  51. Maximize Trading Profits with Correct Position Sizing 2
  52. Fundamental Analysis and The US Economy
  53. A Simple Explanation of the US Economy for Traders
  54. Simple Explanation of The US Economy For Traders Part 2
  55. The Business Cycle and Fiscal Policy - What Traders Know
  56. How Interest Rates Move Markets
  57. What Traders Know About Interest Rates Part 2
  58. What Traders Need to Know About The Structure of The Fed
  59. How the Fed Changes Interest Rates
  60. How to Determine When the Fed is Going to Change Rates
  61. Why Markets Move Ahead of Interest Rate Announcements
  62. How to Trade the GDP Number (Part 1)
  63. The Components of the Gross Domestic Product (GDP)
  64. Intro to Trading Non Farm Payrolls (NFP's)
  65. Trading the News - Economic Numbers - Retail Sales
  66. Trading the News - Economic Numbers - ISM Manufacturing
  67. The Producer Price Index (PPI)
  68. The Consumer Price Index (CPI)
  69. Trade the News - Existing Home Sales Index
  70. How To Interpret the Consumer Confidence Index (CCI)
  71. How to Interpret the Index of Leading Economic Indicators
  72. The Advantages and Disadvantages of Day Trading
  73. The Advantages and Disadvantages of Swing Trading
  74. The Advantages and Disadvantages of Position Trading
  75. How to Keep a Trading Journal
  76. The Most Important Attributes of a Good Trading Journal
  77. The 20 Components of a Successful Trading Plan

Course Description

This is a series of 77 short video lessons meant to give traders an introduction to the basics of trading as well as the components necessary to develop a profitable trading plan.

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