In my first lesson, “Trading Greenspan, Part I," I described the best way to trade Greenspan during the two months when he delivers his Humphrey-Hawkins testimony. But what about the other ten months? The first step is to recognize that when Greenspan delivers a policy speech, the impact can span several months. As I said before, this is because Fed policy doesn’t change on a dime. Thus, once the Fed’s policies become clear, the markets behave as though they assume that these policies will be in place for a while. Your trading strategies, therefore, should evolve around the notion that Fed pronouncements. | Trading Greenspan Part II By Tony Crescenzi In my first lesson Trading Greenspan Part I I described the best way to trade Greenspan during the two months when he delivers his Humphrey-Hawkins testimony. But what about the other ten months The first step is to recognize that when Greenspan delivers a policy speech the impact can span several months. As I said before this is because Fed policy doesn t change on a dime. Thus once the Fed s policies become clear the markets behave as though they assume that these policies will be in place for a while. Your trading strategies therefore should evolve around the notion that Fed pronouncements have lasting impact. But how can we decipher where Fed policy stands on a regular basis I suggest you become a regular Fed watcher. Get in their shadows in other words. Being a Fed watcher is actually quite simple. What it boils down to is merely tracking the verbiage spewed by the FOMC that cast of 13 including Greenspan who vote on whether to raise or lower interest rates at FOMC meetings held eight times per year . There are five additional Federal Reserve officials who attend the Fed s meetings but they vote only every other year they are in essence the proverbial flies-on-the-wall at the FOMC meetings . While their views matter too keep your focus on the voting members. To get you comfortable with Fed watching think about it this way let s say that you ve been asked to solve a mystery where all the principal players are known they talk all the time you get a plethora of clues about what they re thinking they give you verbatim transcripts of what they say and they give you the minutes from all of their policy meetings. I ll bet you can crack that mystery in a jiffy. Seen in this light Fed watching looks pretty well-defined and far less intimidating than most perceive it. One of the things that I often tell people to do and that I find many top investors already do is to read the text of the Fed s speeches. It is not all that .
