How to Trade the UK Election on the JFK AirTrain on Your Way To Madrid

Boris Schlossberg

1. Go with the Flow. When the news is shocking there is always continuation

2. Trade Small. This is important for two reasons – one you will not freak when the trade moves against you by 50 pips in 5 seconds. Two you will almost certainly need to do multi-entry in order to get a good average price for a high probability profit. How small? My usual size is 1X equity ( i.e. no leverage) Today I started with 1/4 of my usual size.

3. Don’t worry about spreads. It doesn’t matter if they are 15 wide. They will narrow and prices will move 100 pips in 5 minutes.

4. Don’t worry about mistakes. (Hitting Buy instead of Sell, setting Stop rather than Limit, etc). You will make it back in the next 5 minutes

5. Don’t use stops. I know this is sacrilege but you will almost always get stopped out in such markets unless your stop is -200 pips or more. Your trade size is your stop. That’s why you trade small.

6. Use limit exits only. You will NOT get done if you try to exit market. The prices are too fast and you will be rejected 10 times in 10 seconds as coming off-market. It’s futile. Move your limits if you want to exit earlier.

7. Take a breath. Prices will come back to your direction even if you miss your first exit.

8. Once things settle down rinse and repeat. The news – unless it changes – will have ripple effects for hours.

9. Get a double espresso in the airport lounge and pre-set your levels while you are in flight.

10. Peace out to all my FX junkies.

Screenshot 2017-06-09 17.50.40

Will UK GDP Stop the Slide?

Will UK GDP Stop the Slide?

Chart Of The Day

Cable has been hit extraordinarily hard over the past few days dropping nearly four big figures as dollar rallied. It’s not quite clear why cable should have weakened so give the generally robust growth in UK economy and the expectation that BOE will follow the Fed in hiking rates. Certainly the BOE is the only other major G-10 central bank that is even considering a tightening policy path.

Tonight’s second revision of GDP data may provide some solace to the bulls if the number is revised higher from 0.7% initially reported. Support may also come from technical factors as the pair is now at key double bottom support on the daily at 1.5350 and should see at least a mild bounce towards the 1.5500 area.

GBP/CAD – Best Pair to Trade the U.K. Election

GBP/CAD – Best Pair to Trade the U.K. Election

Chart Of The Day

GBP/CAD – Best Pair to Trade the U.K. Election

In my daily note on how to trade the U.K. Election (which you can find here), I outlined various scenarios for trading the U.K. Election. While we are fairly confident that the outcome will drive GBP sharply lower, we prefer to wait to lay out our SELL GBP orders tomorrow, hours before the polls close. We’ll be opting for tactic #2, which involves selling GBP below market, you’ll most likely receive the orders tomorrow morning. Our preferred currency pair to trade (if nothing changes) is GBP/CAD. Fundamentally, sterling will fall against all currencies but we prefer buying the Canadian dollar because of recent trend of positive news flow. This morning we learned that manufacturing activity grew at its fastest pace since September 2014 while crude prices rose to its strongest level in nearly 5 months. The fundamental backdrop supports further gains for the Canadian dollar.

Technically, if GBP/CAD drops below the April low of 1.8150, there is no support until 1.80. More importantly however the chart included today shows how the currency pair traded after the 2010 election. Compared to all other GBP pairs, it had the most consistent reaction with the longest follow through.