Brexit Strategy from Nadex

Brexit Strategy Unless you have been living under a rock somewhere, more than likely you have some awareness of what has been nicknamed “Brexit”. If you’re not aware, particularly as a futures or forex trader, you need to be. Brexit, as it has come to be known, is a British referendum, which will be voted on Thursday, June 23 to decide whether Britain will leave or remain in the European Union (EU). The outcome of this momentous decision, no matter which outcome is determined, has great potential to have an overwhelming impact on markets around the world. It’s widely believed, the greatest impact would come from a vote to leave the EU. That said, no one really knows what’s already priced into the markets so even on a vote to stay huge swings may be seen. This vote will not only have a financial and economic impact on the UK and EU, but with the correlation of global markets it will be felt in every major economy. Let’s take the scenario of a vote to leave being the outcome. Many analysts believe this would have an extreme weakening impact on both the GBP and EUR, while a flight to quality would send traders rushing into instruments such as gold and the USD. In the U.S, a massive migration to the USD, could have a long term negative impact on exports, hurting the overall economy and making the Federal Reserve’s job that much more difficult. On the flip side, how much caution has already been expressed by firms lightening up on the GBP and EUR holdings? If the vote is to stay, will we see a rush back in on that side? No one know these answers, yet one thing seems very certain, if even just gauging by the market impact of pre-vote poll results, that volatility could explode and the magnitude of the moves could be historic. Whether you are trading stock indices, commodities such as gold or oil, or currencies, this could be a dangerous time to be in the market. Even with a stop in place, particularly in high leverage markets, your actual risk is extremely hard to manage. If anyone needs a historical study, consider the day the Swiss National Bank decoupled the CHF from the EUR. The move in the EUR was almost 40%! To illustrate what this means, a trader on the wrong side of the EUR/CHF move who had a $300.00 stop, may have lost as much as $14,000.00! Many major firms, with professional traders lost much more than they ever expected could happen. Will the move be similar? No one knows. And since no one knows, if trading with leverage, no one knows their true potential risk except down to zero. True, this volatility can create great opportunity, but at what potential cost? No one day is worth losing everything. So how can you take advantage of this potential opportunity, without the risk of losing more than you ever thought possible? One way would be through the using a traditional long options strategy; however, depending on the premium priced in, this could be a pretty expensive proposition. Additionally, if you do not already have an options account, it is probably going to be too late to get involved this way. Another way to capture this opportunity, while enjoying absolute risk control, is through the use of binary options and/or spreads through Nadex. These contracts are very straightforward with built in floor and ceiling levels that cap the maximum risk exposure of the trader. What this means is that a trader knows with 100% certainty the most they can lose, upfront before the trade is placed. Additionally, because the risk component is built into the contract, there is no need for a stop. You can close out early to limit losses or take profits but you can never be stopped out which is a great benefit in highly volatile markets where whipsaws can occur. Additionally, because all of the trades are fully collateralized, you can never lose more than you expect and can never receive a margin call. Lastly, it’s possible to open your account in 5 minutes or less right online so you have the opportunity to, sensibly, take advantage of all the volatility the Brexit vote may bring. If you are interested in opening your account, or just to learn more, you can do so at [Nadex.com]. Futures, options and swaps trading involve risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. --------------------------------------------------------------- The above is a paid advertisement. Barchart.com is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Barchart.com does not guarantee or verify any performance claims made by such systems, newsletters or services. Trading involves a significant and substantial risk of loss and may not be suitable for everyone. You should only trade with money you can afford to lose. There is no guarantee that you will profit from your trading activity and it is possible that you may lose all of, or if trading on margin more than, your investment. Some of the results shown may be based on simulated performance. SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, SUCH RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. 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