1. Short-term Impact Don't expect a bull run or a bear market out of this. Keep your emotions in check to avoid deception.
2. Expect Price Shocks A price shock refers to a sudden and significant change in the price (3-5x average volatility) from unexpected news.
3. FOMC Days Are Noisy Trading on noisy, volatile event days is not safe.
4. Mostly a Coin Flip It’s been proven over time to be rather a coin flip with little statistical advantage.
5. Exit Windfall Profit Typically, right after the FOMC decision, prices retrace to the previous levels with little effect except for volatility spikes.
6. “Buy The Rumor, Sell The News” This heuristic often drives prices higher in anticipation of the news release.
7. Disparity Means Volatility The magnitude of the price reaction depends on the disparity between the expectations and actual news.
8. Don't Fight The Fed While the Fed's decision is speculative, trading against their trend-setting calls is a losing bet.
For an average risk-averse and loss-averse trader, it is suggested to stay on the sidelines.
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