Considering the polling results of the traders after the last year’s Brexit market chaos and the 2015 Greek referendum, the majority of the retail market participants managed to either benefit from the big moves caused by these scheduled yet dangerous events or at least not to get burnt by them. That seems to be an interesting statistics, considering how far the online brokers go these days to reduce the customers’ exposure to the markets during the periods of voting, elections, and referendums.
I call these occasions planned
However, despite being risky, their known timing makes them an attractive Forex trading signal, akin to news trading. The biggest advantage of these events is their potentially very large upside in case you happen do guess the direction. Straddling such an event with tight
- Nowadays, many (but not all) retail brokers begin to impose higher margin requirements on a range of currency pairs a few days before the planned risky event. This effectively reduces the leverage you can operate with and thus the drawdown you can tolerate with your positions.
- The nearly complete unpredictability makes it hard to guess the direction to avoid placing
both-sidedpending entry orders. Contrarian thinking may help with some cases, but will lead you to a disaster in others. Of course, if you consider yourself an expert in geopolitics and fundamental analysis in general, you might be able to forecast the outcomes accurately enough.
- Even if you are extremely good at guessing the outcomes of the such events, the price slippage and widened spreads can impose a big handicap on your trades during the times of high volatility. If you are using the straddle strategy, you have to be completely sure that your broker can reliably execute trades in
low-liquidityconditions with minimal slippage and with the least possible spread widening.
My own stance on this is to keep away from the FX market if not completely, then at least from the currency pairs that would be the most affected by the expected disturbance. The potential profit benefit seems to be outweighed by the negative sides of the whole process. And how about you?
Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.
If you want to tell us more about how you deal with the planned