Are you looking for forex strategies to trade the Brexit? Or looking for ideas on how to trade brexit? Well, in this post, I will give you 5 price action forex trading strategies which I think you should have in your arsenal.
Now, here’s the thing: you may only have to use one of them…not all.
Because each of these 5 forex strategies are based on different conditions that price may do before the Brexit vote numbers are released.
So if condition 1 happens, use strategy 1, if condition 2 happens, use strategy 2, you know what I’m saying?
What Is Brexit?
If you have been a caveman, welcome to 2016! Which means you will not have a freaking clue as to what Brexit is but you definitely know what a hand brake is…
Well, the good thing is that you can read instead of this:
Brexit is simply an abbreviation of “British Exit”.
Here’s what is going to happen: on June 23 2016, Britain is going to vote to:
- either remain as as a member of European Union
- or leave European Union (exit).
Its almost like the situation that happened in Greece, “Grexit” they called it which never happened.
In the forex word, it is kinda big deal at the moment because there is so much news (maybe hype) surrounding the Brexit agenda.
So the big question is this:
Who Cares About The Brexit?
On this article on the Daily Telegraph, Mark Carney Warns Brexit Is Biggest Risk To Britain’s Financial Stability.
Well, all I know was that Prior to Britain joining EU, it was still standing strong on its own two feet so how come leaving EU would be a huge risk to the British People on June 23rd?
I for one think that British need to Be British. They need to take control of their own affairs.
Gosh…I’m getting carried away here!!!
Let me get back on track.
Now, for all of us traders, all we care about is how are we going to make money during that time when the votes are counted up to see if they are going to remain in EU or leave.
Regardless of whether the price moves up or down during that time the voting numbers are released, as forex traders, we want to know how we are going to take advantage of the price moves that is going to be generated by this vote.
How Will Brexit Affect The GBP (The British Pound?)
There is a lot of argument going on the moment about how the Pound will be affected if Britain leaves European Union.
But based on all the scaremongering by Mark Carney and the rest, if the British Public do vote to leave EU, guess what will happen to the value of the Pound?
It is most likely to drop-therefore you should be looking to sell.
So what currencies will be impacted by this Brexit Vote?
Answer: all the currency pairs that have GBP in them.
But the main one that most forex traders will be watching to trade will be the EURGBP because this Brexit issue is about EURO and the British Pound.
Also GBPUSD. It is anticipated that if Britain votes to leave European Union, GBPUSD will fall.
How To Trade The Brexit
Apparently, the currency pair you should be looking to trade would be EURGBP.
For me personally, I’d be looking at larger timeframes like the daily and the 4 hour timeframes. I will be looking for a breakout trade in the daily for 4 hr timeframe or the 1 hr timeframes.
I want my buy stop and sell stop pending orders placed a little bit further on the outer edges of price consolidations, support and resistance levels before the news is released.
So if a breakout happens, either up or down, one of my pending orders is bound to catch that price move-whichever direction price goes.
Based on these situations given above, we are left with 5 types of forex trading strategies that can be used to trade the Brexit.
5 Forex Trading Strategies To Trade Brexit
Here are the 5 forex trading strategies you should know before the Brexit voting numbers are released.
Brexit Forex Strategy #1: Inside Bar Strategy
There is potential for GBP to consolidate before the news is released and sometimes this kind of price action consolidation creates inside bars.
So if that happens, the price action Inside Bar Forex Trading Strategy may come in handy to trade that setup.
Therefore look for inside bars especially on the daily or the 4hr timeframe only:
- on the 4hr timeframe, it should be previous 4hr bar that should be the inside bar before the news comes out.
- all you do is place a buy stop pending order above the high of inside bars to catch the price breakout to the upside
- similar at the same time, also place a sell stop pending order under the low of the inside bar to catch the price move lower if it happens.
Brexit Forex Strategy # 2: Narrow Range 4 Bar Strategy
The narrow range 4 Bar Trading Strategy is another price action trading system that also happens because of price consolidation.
Just keep an eye out for the narrow range 4 bar setup on the daily or the 4hr timeframes and trade the setup as per the rules of the nr4 bar trading strategy.
Brexit Forex Strategy # 3: 123 Forex Trading Strategy
For this 123 price action trading strategy, I suggest you switch to a much smaller timeframe like the 1 hr, 30 mins or even 15 minutes just 2-4 hours before the Brexit Vote is released and see if you can spot any 123 chart pattern setup.
Now, the thing with this 123 system is that you either only go short if the if 2 is broken to the downside in a downtrend market or you only go long when 2 is is broken to the upside in an uptrend market.
So you will have to think a little bit outside of the box here: you want to place two opposing pending stop orders, a sell stop and the buy stop order to catch the price move on either side. In order to do that, you have to place these two opposite pending orders on the point 1 and point 2.
Brexit Forex Strategy # 4: Use The Idea Of The Asian Trading Session Breakout Strategy
Now the idea of the Asian breakout strategy can also be applied if you see a similar price action consolidation pattern forming before the Brexit Vote.
Now, don’t aim for a 20 pips profit as in the Asian Trading Session, you may miss out on a good move if price moves 1000 pips…who know?
Brexit Forex Strategy # 5: Pin Bar Trading Strategy
Who knows, a pin bar may form? So keep an eye out for this on the daily or the 4hr timeframe.
Note, even if a pin bar forms, nobody really knows which direction the price may go so place opposite pending orders on both sides (high and low) to catch the breakout move in whichever direction price heads.
Brexit Forex Strategy # 6: Trendline Trading Strategy
As Brexit date nears, look at your charts and see if you can draw a trendline based on the daily, 4hr, 1hr or 15 minute charts.
If you can draw a valid trendline and you see that price is most likely to hit that trendline just before the Brexit news, just watch that is most likely to hit the trendline and after it closes, place pending opposite orders of buy stop and sell stop orders on both sides of the high and low respectively to catch the breakout in whichever direction price head to when the Brexit Vote numbers are released.
- Spreads my increase just a few minutes before the Brexit news therefore if your stop loss is placed too close, you may be out too early before the price moves in the other direction.
- price spikes may happen which can stop you out prematurely if your stop loss order is placed too close to the price action on that date just a few minutes before the Brexit news
So keep that in the back of you mind should you decide to trade the Brexit and maybe focus on trading setups that allows you placed pending breakout trade orders a bit far way from the immediate price action.
Do not trade heavy, meaning, do not risk a lot of your account in this trade. This is only a one time event, so if you lose, make sure you lose little because there is a tomorrow to trade.
So there you have it, the 5 forex strategies to trade the Brexit-but know that when that day comes, these trading strategies may not be be trading setups that form.
It really depends on what kind of setup you see forming a few hours or the day before the Brexit referendum vote for you so you will know what kind of trading system to use.
It is important to watch and monitor the price action just a day or two before the Brexit vote day on June 23 and see if you can spot the trading setups that may form and also on the day, look for potential setups where you can have low risk:high reward breakout trades.
Now, I’ve only mentioned 5 forex strategies to trade the Brexit but there can be other setups that can form, like the:
- head and shoulders pattern so if that happens, you need to use the head and shoulders trading strategy
- or there might be a ascending triangle pattern (use ascending triangle strategy)
- or the descending triangle patttern (use descending triangle strategy)
- or the symmetrical triangle pattern (use symmetrical triangle strategy)
So you need to think outside the box a bit here and based on what type of price action you see, you can then choose the appropriate trading strategy to trade the Brexit Event.
As usual, I always end my posts asking you to tweet, like, share, link and even mention this article in other forex blogs, forums, websites that you may be a member of. Thanks for visiting forextradingstrategies4u.com
Great article! If one would put a sell stop, then it’s a no brainer to put a buy stop. Though, I was one of those who only had a sell stop before reading your article.
Quick question, what if I had a buy stop and a sell stop at 200 above and below the current price? Would it work?
you are exactly right. If you want to capture the breakout in any direction, you got to place two opposite pending orders, both a buy stop and a sell stop order.
Did you mean 200 pips?
place stop order 200 pips away from current price would be a VERY LARGE DISTANCE AWAY to place it in my opinion but it really depends on how large the spreads are just before the Brexit Vote results are to be realeased.
Should you decide to trade it, that should dictate how far away you should place pending stop orders.
A better option would be to use the daily or the 4hr candlestick and place pending orders at least sufficient distance away.