I felt the need to cover this subject as well before the year end, because in my humble opinion it will be the dominant market driven theme of 2014, and if you're an investor or an active trader you want to make sure you understand the market implications of such a big event, because it will dictate the market tone for the next year. Even if you're only a technical analyst trader there is no way you haven't heard at least one time about "Taper", so have you ever asked yourself what does it mean and how it will affect your trading operations? The sole purpose of this article will be to answer precisely to that question.
The word tapering in financial terms is increasingly being used to refer to the anticipated reduction of the Federal Reserve's quantitative easing(QE), or bond buying program. The current Federal Reserve quantitative easing (QE3) accounts for purchases amounting to $85 billion in Treasuries and Mortgage Backed Securities (MBS) per month, with the main scope lower interest rates and therefore bolster growth.
- What is Quantitative Easing?