On Thursday June 23rd we have the EU referendum in the UK, ‘Brexit’. The vote is to determine whether the UK remains part of the European Union.
Brexit is similar to the Scottish referendum and Grexit last year, however, the impact of the result is expected to be far greater. We are already seeing higher volatility across all markets and this is expected to increase further leading up to the vote.
What can you do to prepare?Clients are advised to use extreme caution over the next few weeks while the volatility and uncertainty remains high. Any client’s wishing to trade should consider the steps below to mitigate the risks from the high volatility.
Increase capitalisation – Top up your funds in case margins are increased on products that you are trading and to prepare for the higher volatility.
Decrease exposure – Periods of heightened volatility demand lower exposure. Lower exposure will allow positions to move more out of the money without exceeding your defined risk limits. Also consider further limiting exposure to or ceasing trading on products that will be most affected by Brexit.
Use stop losses and wider stops – Using stops in the markets has never been more crucial. Unexpected moves are likely in the lead-up to the EU referendum, so make sure to protect positions with fixed stop losses.
Actively monitor your account – Both manual and automated Traders who have open positions between now and the 23rd of June are encouraged to monitor trades closely. Price action will likely fluctuate aggressively during this time, therefore it’s imperative to keep a tab on all positions taken.
Traders should also be aware that volatility may occur before the result is finalized, based on early vote counts and rumors, so stay safe, and good luck.