By Rob Colville on May 12, 2016 in Trader Interviews
On 23rd June 2016 it is possible that everything is going to change. This is the date of the EU referendum, and if the UK chooses to leave then those who traded wisely are going to end up with a nice payday. And it is for this reason that the Brexit (a contraction of ‘British exit’) can make you rich. Even if there isn’t a Brexit and we remain in the EU the markets are going to be pretty well shaken up, so money can be made whatever way we go. But the Brexit will be the biggest payer.
It can. The Brexit can make you rich, but if you miss out on this trading opportunity the chances of it coming around again quite like this are tiny. If it does, it won’t be for a good few decades yet, and the markets could be entirely different by then. So you should make the most of this exciting chance – if it’s right for you. As we get closer and closer to 23rd June things are going to get more and more volatile in the currency markets, and that makes it really rather interesting…
If you want to know how the Brexit can make you rich, it’s quite simple – if you know what to look for. A Brexit would mean good things for the Japanese yen and the US dollar, and they would grow against the pound. In Europe a Brexit would mean that everything and everyone, from trade and industry to services, would need to re-look at any trade agreements made between EU countries and Britain. It would also mean that the UK’s credit rating could change if it is no longer linked to Europe – going alone could cause it to fall sharply, meaning that borrowing would be harder and interest rates would be higher. All of this would affect the GBP, as the following chart shows:
So a Brexit would, predictors say, cause the British currency to nosedive. But it’s already fluctuating – just take a look at the markets. The uncertainty about whether the UK is going to vote in or out is making everything rise and fall depending on which camp is winning the argument. Since it’s almost a 50/50 split between the yeses and nos, it’s extremely unstable.
How do we know this will happen? Well we don’t for sure, but we can be fairly certain since a currency fall is exactly what happened during the 2015 General Election and the Scottish Referendum. At those times, the GBP fell by over 500 pips, and since the EU referendum is an even bigger deal, we can safely (as safely as possible anyway) predict that we’re in for more of the same – and then some.
At the same time, the Scottish referendum and the General Election created success for the short FTSE and long GBPAUD. Therefore, the Brexit can make you rich if you look closely at trading on these markets.
Predicting long term changes in the currency markets is pretty much impossible. We can look back at what has gone before, and if history repeats itself then EURGBP will rise whilst at the same time GBPCHF will fall. But again, these currency markets are linked closely, and trading on both isn’t a good idea as a win will be cancelled out by a loss.
Of course, if the UK doesn’t leave the EU (and it could certainly happen with both sides being so close in terms of argument) then there will most likely be high probability trend reversals happening since the EURGBP will fall and the GBPCHF will rise or at the very least remain stable.
If you really want to look at how the Brexit can make you rich, currency is the ideal trade to make because currency is what will be affected most in the shortest amount of time. But there are other things to look at. The UK’s debt could grow if a Brexit came about even if we don’t borrow any more money; it’s simply because of our credit rating. If that falls, interest rates go up, and we suddenly owe more. Investment could falter, and trade agreements might be harder to organise because no one wants to trade with a country with a poor credit rating (even if we had a great AAA one the day before the Brexit).
If you want the Brexit to make you rich, you’re going to need to trade on the back of it. So where to begin? Let’s go back to the start, when the currencies began to fluctuate. It was 1st December 2015, and it was a pin bar reversal pattern seen in the GBPCHF. This pattern was at a lower high near multi-year resistance, and these are the kinds of trades that pay out really well, so once that appeared it was time to look deeper. And the pattern needed to be charted, as below.
Since December 2015, two high probability trends have made themselves known, and when they did they needed to be added to the chart as well. These trades are excellent value as they will gain around 30% with a risk of only 1 or 2%.
It’s the Brexit that will potentially make you rich, and not necessarily the UK staying in the EU, so if the vote goes the way of the yes campaigners, it’s time to pause trading for a bit. If you keep going, you could easily wipe out those nice gains you worked hard to get. Put a safe stop point on your chart so that you can enjoy the money and not lose it all as quickly as it arrived.