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...