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3 Ways to Trade this Fed Meeting
The Federal Reserve’s last rate decision of the year is this week, and another rate cut is on the horizon. 📉 The market is pricing in a 97% chance of a 25 basis point cut, so that’s pretty much expected. But the real action will come from the dot plot, inflation forecasts, and Fed Chair Jerome Powell’s press conference. 🗣️
Prop Trader Edge
December 17, 2024
Hey Prop Traders, here’s are some valuable tips, terms explained and prop firm news for December 17, 2024
✂️ BEST DECEMBER PROP FIRM DISCOUNTS
📌 PROP FIRM TRADING TIPS
The Federal Reserve’s last rate decision of the year is this week, and another rate cut is on the horizon. 📉 The market is pricing in a 97% chance of a 25 basis point cut, so that’s pretty much expected. But the real action will come from the dot plot, inflation forecasts, and Fed Chair Jerome Powell’s press conference. 🗣️
The announcement happens at 2:00 PM ET 🕑, followed by Powell’s press conference at 2:30 PM ET. If projections like the dot plot 📊 are released, they’ll drop with the rate decision. For traders, this is one of the most significant—and volatile—events of the year.
Let’s break it down.
💡 What Matters Most
The dot plot is the star of the show 🌟. Back in September, the last dot plot projected 100 basis points of cuts in 2025.
If this projection holds steady, it could be seen as dovish 🕊️ and push the dollar lower ⬇️.
If it drops to 75 basis points of easing for 2025, this would signal a less dovish stance that might boost the dollar ⬆️.
Chair Powell’s press conference 🗣️ will also be key. Recently, he described the U.S. economy as "the envy of the world." 🌎 While growth is slowing, the labor market is strong 💪, and inflation is sticky 📈. Powell’s tone and comments on inflation and future policy will drive the market’s reaction.
Pro tip: The most important points usually come within the first 15 minutes of Powell’s speech. 🕒 During the Q&A, reporters often dive into the big questions that matter most—usually in the first three. 💬
🎯 How to Trade It
There are three ways to trade the Fed rate decision:
Proactive Trading 💥
If you’re confident in the outcome—like expecting the dollar to rally ahead of FOMC—you can buy dollars before the announcement. Just be cautious and consider either exiting your positions or reducing your exposure 5 minutes before the release.Reactive Trading 🕵️♂️
With this approach, wait for the rate decision, dot plot, and projections to be released, let the market digest the news and then react based on how the market moves. Rate decisions tend to have continuation.Standing Aside 🚫
Sometimes, the smartest move is not to trade. If the volatility feels too high, waiting until the next session to trade can save you from unnecessary stress. If the takeaway is significant, there should be opportunities to ride in the move in the Asia and European sessions.
📅 What to Expect on FOMC Day
2:00 PM ET: The initial reaction happens immediately as the rate decision, dot plot, and projections are released.
Fewer rate cuts or inflation concerns? Dollar should rally ⬆️.
Lower growth and more cuts? Dollar should fall ⬇️.
2:30 PM ET: Right before Powell’s press conference, you might see some consolidation 🤔 or profit-taking 💰.
During the Press Conference: Volatility spikes 🚀. Powell’s prepared remarks are critical, but the Q&A can add even more fireworks 🎆. By 3:00 PM ET, the market usually finds a clearer direction, which can carry into the Asia session 🌏.
🔑 Final Thoughts
The Federal Reserve’s final meeting of the year is a must-watch 🎥. Whether you trade before, during, or after the announcement—or decide to wait it out—understanding the key moments, like the dot plot release 📊 and Powell’s remarks 🗣️, can help you navigate the action.
Stay prepared, expect volatility 🔄, and watch how the market reacts to every twist and turn! 🚦
📌 PROP FIRM TRADING TIPS
Why Consistency Rules Don’t Suit Every Trader—and How You Can Trade Freely
Consistency rules are a common feature of many prop trading firms. They sound straightforward, but for certain types of traders—especially swing traders—they can become a frustrating roadblock.
So, what is the Consistency Rule? 📜 It’s a requirement that no single trading day can account for more than a set percentage of your total profits—usually around 30% but it depends on the firm.
Here’s how it works:
Imagine you’re trading at XYZ Proprietary Trading Firm, where the consistency rule is set at 40%. If you earn $10,000 in a week, no single day can contribute more than 40% of that total.
Monday: $4,000 (40%) 💰
Tuesday: $3,000 (30%) 💰
Wednesday: $2,000 (20%) 💰
Thursday: $500 (5%) 💰
Friday: $500 (5%) 💰
This setup works perfectly for traders who generate steady daily profits. But what if your trading strategy relies on catching big, high-reward trades?
For instance, if you made $6,000 on Monday and only $1,000 on each of the following days, you’d violate the rule—even though you were profitable overall. ❌ This is why the consistency rule can be a dealbreaker for swing traders or those who trade for large risk-reward payoffs.
Why Consistency Rules Could Hurt for Swing Traders
Swing traders approach the market differently. They aim to capitalize on bigger moves, often holding trades for days or even weeks to maximize profits. This naturally creates uneven profit distribution, where:
A single winning trade can account for the majority of their profits.
Other days may involve little trading activity or small losses as they wait for their setups to materialize.
For swing traders, this isn’t a flaw—it’s the core of their strategy. Trying to fit into a consistency rule can feel like forcing a square peg into a round hole.
The rule penalizes the very thing that makes swing trading effective: occasional big wins. Instead of focusing on capturing high-probability setups, swing traders are forced to artificially limit their profits on winning days or adjust their style to fit the rule, which can hurt their overall edge.
Trade with a Firm with No Consistency Rules
If you’re a swing trader—or simply someone who wants to trade on your own terms—the good news is that not all firms enforce consistency rules.
Take Axi Select, for example. This broker-powered firm doesn’t impose consistency rules, meaning:
You’re free to trade your way, whether you’re a scalper, day trader, or swing trader.
There’s no need to worry about big wins being a problem.
You can focus entirely on your edge and strategy, not arbitrary restrictions.
By earning a funded account with a firm like Axi Select, you avoid the rigidity of traditional prop firms and gain the flexibility to trade however you like.
Final Thoughts
Consistency rules might suit traders who aim for steady, daily profits, but they’re not for everyone—especially swing traders who thrive on high risk-reward setups. If you’re tired of being restricted by these rules, it’s time to explore a better option.
With Axi Select, you can trade freely, focus on your strengths, and build your trading career without unnecessary constraints. At the end of the day, it’s your strategy, your edge, and your success. 💼 Trade the way you want.
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