How to Trade Bernanke’s Speech… For Up to 500% Gains
As usual, Fed Chairman Ben Bernanke’s speech to the International Monetary Conference last Tuesday really shook up the markets.
The dollar index, the Dow and the S&P all swung wildly.
On the surface, Bernanke’s message was pretty clear-the latest round of quantitative easing (QE2) will end as scheduled, but interest rates will remain low.
As a trader looking for profitable opportunities, what does that mean for you? Let me show you…
First, we can use a word cloud (a fancy name for a visual representation of the words used in his speech) to dig deeper into Bernanke’s remarks. The more times a particular word is used, the bigger it appears in the cloud.
Here’s how it looks. The result is very revealing…
Bernanke Word Cloud
You can immediately see that the two big words are “inflation” and “growth.”
Evidently that reflects the core challenge before the Fed, which is to stimulate growth without causing inflation. With the Fed’s historic record of being unable to do either well, we are in for a wave of disappointment on both grounds.
In the medium- to long term, that is bearish for the dollar.
In the shorter term, however, things are a lot more interesting…
#-ad_banner-#The end of QE2 is coming in the middle of the U.S. government’s debt ceiling and deficit debates. So there is a lot of uncertainty in the air—the perfect climate for intraday dollar swings… and big currency and index moves!
As you may know, my favorite way to trade currency and index movems is to use what’s called a “binary option,” or “binaries.”
Binaries let you speculate on currencies with known and limited risk. Better yet… they expire in under a week, meaning you won’t have to wait weeks, or even months, for a play to pay off. And if you’re right about the direction of the movement, they offer huge profit potential.
If you haven’t checked out binaries yet, see my tutorial here.
The binaries I suggest looking at this week are on the S&P 500. With fears that China’s economy is slowing down and the U.S. congressional tug-of-war over federal spending, the markets are very edgy. Anything can trigger a sell-off in the U.S. stock markets.
The best way to play this trend is to look at deep out-of-the-money binaries on the S&P 500—or, as I call them, DOOM binaries.
Being so far out of the money means they react sharply to big news or a surprise move. They cost less than $15–$20 to get into. And when they work out, they pay $100 even.
That means up to 500% returns… if you get the market move correct.
I suggest you give binaries a shot. They’re exciting. Fast paced. And potentially very profitable. For a great tutorial, check out the Nadex binary exchange. You can find its step-by-step, interactive guide right here.