How to Profit from the EU Referendum?

[timsk]

I imagine that the big players will be backing their judgment and building substantial positions in preparation for the forthcoming referendum. If they're right, they'll make some serious coin. In the lead up to the referendum, my guess is that the markets will become increasingly volatile and, immediately after it when the result is known, there could be some large swings in the major FX pairs and equity indices. So, whatever your view - in or out - if you wanted to take a punt and back your judgement - how would you go about it?

I'm undecided about which way I'll vote, but I suspect that Dave C' and the 'stay in' crowd will win the day. Based on that, what instrument should I buy (or sell) to get the biggest bang for my buck - and why?

Discuss!

 

[Eric Geddes]

I imagine that the big players will be backing their judgment and building substantial positions in preparation for the forthcoming referendum. If they're right, they'll make some serious coin. In the lead up to the referendum, my guess is that the markets will become increasingly volatile and, immediately after it when the result is known, there could be some large swings in the major FX pairs and equity indices. So, whatever your view - in or out - if you wanted to take a punt and back your judgement - how would you go about it?

I'm undecided about which way I'll vote, but I suspect that Dave C' and the 'stay in' crowd will win the day. Based on that, what instrument should I buy (or sell) to get the biggest bang for my buck - and why?

Discuss!

What about the Black Swan scenario? – Dave loses. Conservative party goes into terminal split over who should take over. Shenanigans result in general election by end of year. Corbyn wins. Disaster.
Best option then? – Emigration?

 

[timsk]

What about the Black Swan scenario? – Dave loses. Conservative party goes into terminal split over who should take over. Shenanigans result in general election by end of year. Corbyn wins. Disaster.
Best option then? – Emigration?

Hi Eric,
Just to be clear, the thread isn't about the politics of the situation or individual members' views - either for or against continued EU membership. Both of these are covered in other threads. It's about the best way to profit from whatever you expect the outcome of the referendum to be. So, for example, if you think the the result will be to stay in, will you be building a long EUR position perhaps? Alternatively, if you think the result will be to exit, will you be building a short GBP position? If you think your black swan scenario will prevail, will you be backing your judgement by shorting the FTSE?
Tim.

 

[Eric Geddes]

Hi Eric,
Just to be clear, the thread isn't about the politics of the situation or individual members' views - either for or against continued EU membership. Both of these are covered in other threads. It's about the best way to profit from whatever you expect the outcome of the referendum to be. So, for example, if you think the the result will be to stay in, will you be building a long EUR position perhaps? Alternatively, if you think the result will be to exit, will you be building a short GBP position? If you think your black swan scenario will prevail, will you be backing your judgement by shorting the FTSE?
Tim.

Ok Timsk - take your point. But...... I still think your question is too simplistic. It could be a "hung" result with possibly another vote later. Now that would present traders with a dilemma! Anyway, back to your lead: what should we do for "In" and what should we do for "Out".

 

[Timl87]

This is an interesting question Timsk. Sterling took a dive today over Brexit fears, so more fluctuation can be expected in the coming months. I personally think we will be staying in EU and would like to take some long positions on shares/currency which will bounce if Britain vote to remain. Have you currently taken any long or short positions based on the EU referendum?

 

[mike.]

Imo, dont leave it to guesswork, 2 separate s/b accounts with tight spreads and guaranteed stops, set stops at a decent distance and calculate total exposure should price bounce off both, this is your worst case scinario...then long eur/gbp with one account and short the other account, got to be looking at a 100 + pip move on the result announcement....

 

[tomorton]

Great question. Yes, this might happen or that might happen, but what are we going to do about it?

Seems like keep shorting GBP right now, but that's not news.

 

[Forexmospherian]

Great question. Yes, this might happen or that might happen, but what are we going to do about it?

Seems like keep shorting GBP right now, but that's not news.

Since the EU Referendum date was announced along with Boris going opposite to Dave etc this last 2 trading days have given experienced intraday traders a field day on Pound crosses

For example

GU - Friday afternoon/ evening - up over 150 + pips and then from Sunday evening Open - down 320+ pips today

GA - Today - dropped 400 pips

GJ - Today - dropped over 200 pips

And on top of that there as been over 170+ pips of buys from after 12 30 pm UK time on the GU and GJ

Add that lot up - 1300 + pips to go - at - of you got just 20% of that total - ie over 250 pips - I would say it not been too bad a day


I remember UK election day 2010 - the GU moved over 600 pips in one day and the GJ moved approx 1000 pips

Bearing all this is mind - its the perfect excuse for the market makers / players / dark pools / other parties etc etc to have a field day with the GU in late June- but please don't forget the action on the other Pound crosses as well

Whats my plan??

To carry on intraday trading over this next 4 months - knowing that if the market uses any logic it will try and set up massive false sentiment for both Bulls and Bears and of course "fry" both parties many times maybe before the results come out late June 23rd / 24th - ie Thursday evening Friday Morning.

Leave partial stakes on intraday rallies - get those stop in profit and move them as the markets move - relax - no stress - and if possible

(Not recommended for newbie or inexperienced FX Intraday Traders
)

- make sure you have a broker with a guaranteed non negative balance guarantee

- open another account - stick $1k or even more - get leverage of 400:1 plus and trade it like you want it whilst staying sensible on your proper trading account.

Every day or week - all depends how good you are take at least some profits out - so if you do blow your $1k before June - then you might have made 3 or 10 times more before it happens - (or in Major Magnums case 20 times ) ;-)

Long time to go yet - most importantly stay in the game - and of course - dont believe anything you hear ;-)

Regards

F

 

[mike.]

I'm assuming it being a referendum that results will be announced by area/constituency one at a time like the Scottish referendum..Also, im assuming this will be announced throughout the evening, giving a end result in the early hours of morning...Therefore, outside London and USA opening times, will you then not be relying on Asian and Australian markets for liquidity ?

 

[Forexmospherian]

http://www.bbc.co.uk/news/business-35628733

After the first real trading day since the referendum date here's what they are saying on BBC News

We have been lower in 2008 and 2000 - so there you are a sequence - every 8 yrs ;-)

With regards to the real action on June 23 or 24 - insiders will know well before everyone else - just like this last Conservative shock clear election win - so I am sure the main moves will be not in the Asian session.

The low of I have got as been around the 3500 area and atm we are around 4150 atm after a 4060 low earlier on today

So another 300 - 500 pips to play with on sells without setting off new alarms bells - and although I cannot see us above 2.100 approx high of 2007 - that's over 5000 pips higher - 2000 pip higher would certainly be on the cards if the market makers think its time to "fry" all the bears of the last 14 -18 months.

Not checked out the GA / GJ / other pound crosses - but as already mentioned the GJ did actually move approx 1000 pips in 1 day in 2010. ( UK election day)

Above 4180 and 4210 I will be intraday buying tomorrow for 4260 -80 area

Under 4100 - I will be selling and watching for a HL above the low of the day

GL - but cannot imaging another day like today on GU for a few weeks or even longer

 

[NVP]

As a day trader I take no view ......but I will enjoy the additional daily volatility it brings .....already the forex markets are rocking .on gpb pairs ......superb !

 

[Oscar Reed]

I will look to buy shares after the event.
Would need a NO vote for my strategy.
After a no vote look for a big overdone sell off in the FTSE.
Look to buy blue chip companies that are sold off and not or less effected by Euro earnings.
See if you get the stocks on a good discount from long term average P/E valuations.
Then try to lock in some gains and maybe divs into year end.

Mind you after reading the some of the above, heaven forbid someone in the UK making a decision.

Will you be able to buy British artwork at discount price's?
https://www.artgallery.co.uk/sales/recent

 

[hhiusa]

Hi Eric,
Just to be clear, the thread isn't about the politics of the situation or individual members' views - either for or against continued EU membership. Both of these are covered in other threads. It's about the best way to profit from whatever you expect the outcome of the referendum to be. So, for example, if you think the the result will be to stay in, will you be building a long EUR position perhaps? Alternatively, if you think the result will be to exit, will you be building a short GBP position? If you think your black swan scenario will prevail, will you be backing your judgement by shorting the FTSE?
Tim.

I think Eric was stating a way to profit from the Brexit. Emigration may be a hedge against a sinking economy due to the Brexit. In one situation, I could see the value of the pound plummet and as a result it would behoove you to move your money and yourself out of the country before that happens.

In yet another situation, I could envision the pound soaring after it leaves. A nation standing on its own without the burden of the EU. Case in point, the GBP/USD is at a relative low, which is good for Americans. When I buy things in England, which I frequently, I get more bang for my buck. If I foresaw that the UK economy stood to benefit from a Brexit, I may leave my money in England and emigrate anyway and possibly move to Spain or Portugal where things are dirt cheap. When the Brexit happened, my pounds in some British bank would be worth more relative to Spain's euro, allowing me to live more comfortably there than I could in the UK.

 

[tomorton]

Don't trust the polls. Bookmakers price stay in EU result at 1/3, leave EU at 9/4.

Admittedly, 1/3 isn't a great r:r ratio but its surely a high probability bet?

 

[hhiusa]

@tomorton

Does this mean that you want the UK to stay in the EU? Do you think UK will leave the EU?

What do you think will happen to the value of the pound if there is a Brexit?

 

[tomorton]

@tomorton

Does this mean that you want the UK to stay in the EU? Do you think UK will leave the EU?

What do you think will happen to the value of the pound if there is a Brexit?

I think there's money t be made regardless of what I think.

However, what I think is -
the UK should remain in the EU
the referendum result will be to remain in the EU
if there is a Brexit referendum result, the GBP will probably have bottomed by the time of the official announcement.

 

[hhiusa]

I think there's money t be made regardless of what I think.

However, what I think is -
the UK should remain in the EU
the referendum result will be to remain in the EU
if there is a Brexit referendum result, the GBP will probably have bottomed by the time of the official announcement.

You seem pretty certain that the UK will stay in the EU. What makes you so certain?

Buy your reasoning, does that mean that we should see a spike in the value of the pound if they decide to stay in the EU?

If UK does leave the EU, and you believe the pound will plummet I also believe that euro will plummet as well. I think the euro will be hurt more than the pound will.

I am hoping that the UK decides to leave the EU. I believe this will benefit non-EU currencies.

 

[tomorton]

The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.

 

[Atilla]

The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.

Not if dragging / lagging countries like the UK and Greece exit and core members remain making the union stronger.

 

[hhiusa]

The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.

I agree with you. The UK is one of the biggest component economies in the EU. The EU will lose a huge chunk of revenue, if it leaves. What hurts one of the countries, hurts them all. 80% of Greek imports are from the UK. This means that they are essentially getting those items at a discount because they are both members in the EU. If the UK leaves, it will become more expensive for Greece. When Greece is hurting financially, the Euro Zone will hurt financially.

The UK and Germany are the only two economies in the EU that matter. Even if the UK's economy and currency drop a little, I believe in the long term, they both will stabilize. However, this cannot be said for the EU if the UK leaves.

By non-EU currencies, I was referring to the Norwegian Krone, the British Pound (if it leaves), The USD and to some extent the Swiss Franc. Norway has never had any of the supposed advantages of trade within the EU because they are not in the EU. Their economy will weather the storm just fine. They have plenty of natural resources, namely oil.

I hope and foresee the UK leaves the EU. In that event, the NOK should soar relative to the euro. I expect the GBP to plummet from the exit, creating an amazing buying opportunity for when the British economy finds its feet and soars to new heights without the lead anchor that is the EU.