c08 JWBT016-Busby September 30, 2008 14:0 Printer: TBD
100 STRATEGIES TO WIN
spectators from Penson who are eyeing the market and waiting for me to
trade it. The fact that my actions are being observed by so many other
traders heightens my anxiety.
It is one minute before the news is scheduled to be released. I quickly
check my equipment. My trading platform is open and ready. My analytical
software is receiving data; everything is primed and set for battle. I gener-
ally execute two Fed trades. One of them is executed shortly after the news
is released. I am in and out of this trade quickly. For that reason, I call it my
“Corvette Trade.” Only highly experienced traders should take this trade.
After I make some quick cash with the Corvette, I let traders digest the
news and react rationally to it. Around 2:00PM, I analyze prices again and
reenter the market. That is, I do so if I see a trend and an opportunity. I
call this trade the Model “T” because it is a much slower trade. Also, like
the original Model “T,” it is pretty reliable because I have plenty of time for
analysis. I may stay with this trade until the end of the session at 3:15PM.
My record of success on Fed Day is good—not perfect, but very good. I
generally walk away with money in my pockets. I am able to do so because I
have a strategy and I know how to execute it properly. Unlike many others,
I do not guess the action the Fed will take, and I do not guess the market’s
reaction to a cut or an increase in rates. I watch prices and let the market
lead the way. I just follow.The Corvette Trade
On Fed Day, I feel like a kid waiting for Santa on Christmas. If I am patient
and read the tape correctly, I will receive a gift, compliments of Bernanke.
Around 1:00PM, I begin to actively prepare for the trade by taking a break
from the numbers and action of the market. I step away from the computer
and walk around the office for a few minutes, get a cup of coffee or a soda,
and spend a few minutes talking with students or employees. I want to
feel relaxed and reset my brain to zero. I do not want to approach this
trade with any bias. Around 1:10PMI return to my desk and focus on the
numbers. I look at the futures indexes. Prices are bouncing up and down
like a kid on a pogo stick. By this time, many traders are anticipating the
announcement and placing their bets. I say they are betting because that
is exactly what they are doing. They have no more knowledge about what
the Fed will do than the rest of us. And even if they knew what action the
Fed was going to take, there is no way anyone can predict the reaction of
the markets. Nevertheless, these trigger-happy traders foolishly jump in.
At 1:14PM, one minute before the news should be released, I begin
writing down prices. I write them down so I can refresh my memory at