Last night the UK Prime Minister Theresa May lost her delayed but long await commons vote, otherwise known as the ‘Meaningful Vote’ by a huge margin.
The immediate reaction of the market was to rise regaining the ground lost to the selloff that had taken place in the hours leading up the vote.
The question for most trades is what’s next and how to trade GBP in the weeks and months ahead.
Kicking the can down the road is now the mostly likely option for Theresa May and this will take place via an extension of the Article 50. The possibility of a no deal Brexit is diminishing by the day as traders we can use this information to our advantage. What it means is that the Brexit that will ultimately be decided upon will be at least as soft as the once we have now and softer still, why do I say this.
The Tories had their chance to dispose off Mrs May they didn’t take, they also had their chance to put in Jeremy Corbyn and obviously they did not take that either. Mrs May has to get cross party consensus and at the same time stop the Tory party splitting, this means that she can get rid of no deal, which means Armageddon for the GBP can be forgotten, which means the next question is how far can it rise. The answer is probably quite a long way.
Please have a look at the attached chart and take a look at the monthly candle which is still currently forming. It looks like a great reversal candle and an opportunity to get LONG.
Remember, the best place to get into a trend is on the reversal not in the middle of the trend, why is this? Because, when you take a loser having started on a reversal you will not lose very much, but when you take a loser when trying for the middle third of the trend the loss might be the same but the frequency of the loss will be much higher which in turn means you will lose more money.
I am now LONG with my stop under the recent lows, lets see how are this can run, we could possibly be at a ‘what ever it takes’ moment for the GBP which means in case of no ‘No deal’ prices could run and run t the upside, this is how FX sometimes work, with emphasis being on the ‘sometimes’, it is essential however to milk the cow dry if this what is going to happen and a standard volatility stop based EA or trading idea would be the best way to trade this move.