Dear Financial Voice Reader,
How do you make money from Brexit? Remember how Soros made money - £1billion – from the collapse of Sterling? Again, that was because of Europe and Sterling being pegged to the German Mark.
So can we make a Billion? Can we ‘do a Soros’. Actually, it’s a lot easier now than it was in the early 90s when Soros did it. Now you can open a Forex account and make a trade on the £. So how do you do it?
Open an account, for instance with a Forex broker. Only ever trade with risk capital. Remember around 80% lose money trading online because they’ve never spent time learning anything.
Next we have to pick the currencies to trade. I suggest £ against the US Dollar. Why not £ vs Euro? Because both will be affected by the vote in the same positive direction so it is too difficult to work out. The $ on the other hand will be relatively less affected than the £.
What’s your trade? Trading works like this. If the expectation of the market is of a hard Brexit and no deal, then the Pound will rise on any news which is opposite to that. If the news confirms that, then the Pounds will likely rise too, because the news is ‘out there’ confirming the bets already made and so the bets can be closed out.
Similarly if the expectation is for a soft Brexit, then if one is confirmed the £ will fall and if a hard Brexit happens instead, the Pound will fall. So the real question is what is the market expecting now? And it appears to be expecting in my estimate 60-40 a hard Brexit.
However it’s really the surprises that can knock us off our feet. You see the only actual facts that can come out before March are that there is a soft Brexit deal. You are not going to have before then confirmation of no deal.
So the risk is of a soft Brexit impacting our position. So the real risk is of the Pound rising. Any falls before actual announcements are just the market re-assessing its views on the odds of a hard or soft Brexit. So one final complication – if the £ eases up as the market gets dribs and drabs of news that a deal will be done, then the £ will fall when it happens as people close their bets.
Hopefully that is not too complicated.
Alpesh
To learn trading, see the free course at www.alpeshpatel.com
