UK may decide to remain in EU and this will cause the British pound to continue to move up further like it has been doing the past few days as the market was factoring in the possibility that Britain will still remain with EU.
And today is 23rd June 2016- the Brexit referendum vote is a matter of hours away. And I’ve been looking at the charts… especially where price is now in regards to major support levels, resistance levels, trendlines fib etc.
And here’s an interesting thing: all 5 charts are in potential “SELL” levels(zones) for GBP.
The important word here is “potential” because these price action trading setups may not play out as anticipated if Britain votes to remain with European Union.
WHAT IF THE POLLS ARE WRONG?
Most polls are showing that UK voters are going to vote “remain with EU”. And even the polls show that there’s not much difference between the “leave camp” and “remain camp”.
But consider this…what if the outcome of the actual voting is the exact opposite? What if Britain Votes to Leave EU?
As the saying goes, “all hell will break lose!”
If that is the case, the price action that is being revealed by these 5 charts which I’m about to show you are going to really make some very impressive “home run” trades for sure.
PRICE ACTION TECHNICAL ANALYSIS BEFORE BREXIT
These price action technical analysis of these charts show that GBP is in a “potential sell zone”.
What this means is that if you were trading based on price action, you’d be looking or waiting for sell signals to go short in these zones.
Lets have a look at these 5 charts then..
CHART 1: EURGBP
- potential buy for EURGBP (which means GBP falls)
- notice price is now at a support zone/level
- if Britain votes to leave EU camp, expect EURGBP to shoot up 400 pips and more…
CHART 2: GBPCAD
- potential sell signal
- notice how price has now touched the falling trendline?
- if Britain votes to leave EU, expect a 900 pips move down and this price action setup will play out very if voters decide to leave EU
CHART 3: GBPCHF
- price is at a very obvious resistance level and therefore a potential “sell zone”.
- if the Brexit leave camp wins,expect more than 800 pips move on this pair-down as this would reinforce this price action trading setup!
CHART 4: GBPJPY
- price is now in a resistance level (zone) therefore a potential sell zone.
- expect 900 pips move down if British voters vote to leave European Union and this will play out perfectly with this price action trading setup.
CHART 5: GBPUSD
- potential sell signal on downward trendline touch-notice price has touched the downward trendline
- if voters vote to leave EU, this will only make this sell trading setup work extremely well
- expect a 950 pips move down on this pair should that happen.
The Opposite Can Happen
Yeah, the British can vote to remain in EU, and this will only keep causing price to move in the direction where it has been headed for the past few day for GBP-up!
Will Britain vote to leave EU?
If that happens, that would be enhance the validity of these 5 charts.
But the opposite can also happen. That is to be expected. Which means the price will go up. EURGBP will continue falling.
How To Trade These Trading Setups?
As you can see, these trading setups are based on the daily timeframe.
The best timeframe I can think of right now to trade these trading setups is the 4hr timeframe.
Which means you switch down to a lower timeframe, the 4hr timeframe to place your trades.
Because you don’t really know which direction price is going to move, what can be used is called a straddle trading technique.
That’s when you want to trade a breakout trade in any direction.
So what you do is place two opposite pending stop orders on both sides so whichever direction the price breakouts after the vote is released, you capture that move with one of your pending orders.
Here’s what I mean:
Brexit Trading Rules /Guide Forex
- Place buy stop pending order at least 3-4 pips above the high of the previous 4hr candlestick, not the current one that is forming. You must give a little bit more “spread room” if the current price is near the high of that previous 4 hr candlestick, and that goes for the sell stop order below as well) which means you can place your pending order more than 5 pips way. Why I say this is because forex brokers are most likely going to increase spreads during this time so you don’t want to place your pending orders too close. This spread indicator is very useful to monitor current broker spreads for your mt4 charts.
- Similarly, also place a sell stop pending order at least 3-4 pips below the low of the 4hr candlestick on the other end.
- stop loss should be placed on opposite ends of where your pending stop orders are.
- Aim for a risk:reward of 1:5 minimum
- When one pending order is activated, immediately close the other one that hasn’t been activated.
- anticipate increase volatility which means potential price spikes, huge spreads etc.
- should you decide to trade these “Brext Trade Setups”, trade with a very little risk on your trading account.
- stop loss can be jumped and you can suffer a massive loss if your forex broker does not have “guaranteed stop loss in place”. It happened to me once, it was a very scary experience.