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<h3 style="text-align: center;">BREXIT</h3>
<h3 style="text-align: center;">THE BREXIT
FALLOUT OPPORTUNITY TRADES</h3>
<u>BACKDROP &amp; OVERVIEW:</u>

Earlier this year, I launched a series of trades based around the G7 countries. The basis of these trades was to use the 2016 currency targets from many financial institutions in conjunction with my own FUNDAMENTAL longer-term views.

They were successful and some of you may still be LIVE in these original trades. I had a rather peculiar situation with a new broker where trades can time out and…they did. I never knew that that was possible with live trades but I had checked the box in my original set up. Rather annoyingly, I missed the moment and never really felt committed to getting back into those trades…. next year 2017, they will be on my agenda once again to look at.

The BREXIT offers up the opportunity to look at longer-term trades once again.

These are my own thoughts and ideas. You may NOT agree with me at all or only partially with what follows, it is entirely up to you if you want to add these trades or not.

I am taking only small positions to start with as want to have a lot of flexibility with stop loss levels. Over the past few sessions the GBP has been even twitchier and more volatile than usual.

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<u>HISTORY BEHIND THESE TRADES:</u>

Last month whilst in the middle of Sales Presentations in the UK and IRELAND the UK BREXIT referendum took place.

On the night, I did NOT trade the event the way that I had planned for several reasons.
<ol>
 	<li>The result took me by surprise as much as it did the “Bookies” and “The Pollsters”, never mind the major players involved in the debates. If you recall Nigel LaFarge (UKIP) practically conceded defeat prior to the Sunderland result coming through. After that it was all history as the TV pundits have stated.</li>
 	<li>On the night itself, being hotel based my Internet connection was not brilliant.</li>
 	<li>I completely underestimated the difficulties in reverting back to trading multiple brokers off basically a MacBook Air and iPAD.</li>
 	<li>Communication was stretched as social media networks were in overdrive and to cap it all, I was reading and checking reports that certain brokers had in fact closed the doors to trades involving any currency pair that was GBP related.</li>
</ol>
To sum up it was not an ideal trading situation and I decided not to publish trades and I merely scalped the markets in and out of trades for the day following the vote. Whilst this was for me personally, financially successful, it was NOT what I had planned to do.

I knew then that to be more constructive in trading THE BREXIT FALLOUT I had to be patient and wait.

When I was holding seminars in BRENTWOOD, GATWICK, READING and BRISTOL discussions took place about the GBP/USD and where would it trade based off a REMAIN or BREXIT outcome.

Based upon a BREXIT result prevailing, the level of 1.3000 was openly discussed and this was achieved.

However, myself and many other traders could NOT see how deep the effect of a BREXIT would run. The politicians involved in the debates in the UK certainly flooded the population with fear and painted dreadful outcomes, but these were NOT based upon facts just thoughts to attempt to sway voters.

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<u>THE BREXIT FALLOUT PERIOD SO FAR:</u>

To say that there has been nothing but uncertainty in the period following the result would be one of the most over-used statements in the financial markets this year so far.

Never mind market uncertainty, the UK has seen massive political uncertainty with David Cameron resigning and Theresa May (Ex. Home Secretary) stepping up as both the new Conservative Party leader and UK Prime Minister. The opposition Labour Party under Jeremy Corbyn’s leadership looks doomed to the opposition benches. He refused to step down as leader despite a massive vote of no confidence.

Theresa May appointed BREXIT champion and former London Mayor, Boris Johnson as Foreign Secretary in her new cabinet, a very interesting appointment to say the least. If I were in her shoes I would have done the same. This move will either make him a major force in her cabinet or she has given him enough rope to hang himself.

From Brussels, Berlin, Frankfurt and Paris the initial comments were that the UK should move quickly to trigger article 50 of the Lisbon Treaty to formally begin an exit process from the single market, but there is now an acceptance that this will be a much slower process not even starting until 2017. The process will take an estimated 2 years to complete.

Basically, we have an extended period of great uncertainty.

No one could have predicted that UK business would basically come to halt following the referendum votes being counted. This looks like what has essentially happened.

Prior to the vote, the fear of God vis-à-vis the financial market was given to the voters to consider. Last weeks PMi numbers reflect “THE STOP” and re-think that is going on right now. There is CBI data, some retail numbers plus consumer confidence figures all out in the next few days.

Investment into the UK has apparently taken such a beating; some areas, such as housing are quoting a virtual STOP and PULLBACK from existing commitments.

The BOE under the leadership of Mark Carney has promised support by way of liquidity to banks if required and of course to keep the economy moving, or kick-start it again he is looking at interest rate cuts.

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<u>SO WHATS NEXT:</u>

My thoughts are that the BOE will cut rates next month, supporting the banks and “the city”. Basically, Carney will do a “Helicopter Ben” impression by flying over the city of London dropping waddies of cash!!

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<u>THE SCOPE OF THE OPPORTUNITY:</u>

I believe that we have two bites of the cherry with the BREXIT OPPORTUNITY TRADES.
<ol>
 	<li>The sell off in cable trade.</li>
 	<li>The spike back trade.</li>
</ol>
There will be a spike back. I do NOT know when that will happen, but it will, and, it should be epic.

I wrote in last weekends DRIVE THRU blog about the GBP fall and the levels that I felt it could fall to across a number GBP crosses in addition to the GBP/USD. Some additional thoughts and comments with levels were written on the charts that formed that section of the blog.

The excel sheet below shows you the trades that I have in mind. These have already been added to my broker account.

<a href="http://weeklyfxdrivethru.com/wp-content/uploads/2016/07/BREXIT-TRADES2-DROPBOX-FMT.png"><img class="aligncenter size-full wp-image-8207" src="http://weeklyfxdrivethru.com/wp-content/uploads/2016/07/BREXIT-TRADES2-DROPBOX-FMT.png" alt="BREXIT TRADES(2) - DROPBOX FMT" width="569" height="491" /></a>

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(The individual charts will accompany Tweets confirming the trades and will also be emailed  in two folders. The first folder contains that charts that I first published in last weekends "DRIVE THRU" blog and the second folder contains the updated charts since the original charts were published.

Without doubt there are huge potentials of both pips and $$$ available. Some of the measured movers based off chart patterns are massive if they play out. At the same time though there is as always RISK with trading Forex.

I have also added to this communication via email, all charts from the “DRIVE THRU” blog last weekend, plus additional charts that I have used to further examine entry and exit levels.

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<u>CAUTION / RISK / PLEASE NOTE:</u>

I have amended these trades so many times to try to get the best entries. Before I had completed this document to go with the trades we had some price volatility in Japan that caused the markets to skew. This price action affected the antipodean currencies and of course there was a knock on effect into the GBP cross-rates. These caused a small delay, as I needed to look at revised entries.

Because of the increased volatility of GBP pairs, it will NOT be cheap to trade this BOT trades.

The initial trades have a RISK total of about 3,750 pips, which is under the weekly average true ranges for each pair added together. I would factor in about 300-350 pips of RISK for any additional BOT trade set-ups. I also want to point out that some flexibility in stops needs to be applied to trades that may be premature in activating. The level of 1.3050 breaking in the GBP/USD is key to the start of the bigger move in my opinion.

To give you an idea of RISK with your trading account, the following will hopefully shed some light on my thinking in this area.

Based off the initial 12 trades posted, your RISK per size of lot traded is simply expressed as follows: -

1 x MICRO LOT = approximate total risk of $360.00
1 x MINI LOT = approximate total risk of $3,600.00
1 x STANDARD LOT = approximate total risk of $36,000.00

However, if like me you will be trading a mixture of lot types and position sizes, you will require a decent sized account to trade these trades without attracting many margin call issues.

Once we have approximately 20 trades in place at any one time I have calculated my account requirement as follows based on MINI LOTS.

I will trade position sizes from 5 micro lots through to 3 x mini lots on the GBP pairs.
<ul>
 	<li>I have based my calculations on an average of 2 mini lots as the average position size.</li>
 	<li>I am assuming a combination of 20 live or limit orders in place at any one time.</li>
 	<li>Initial trades RISK = 3,750 / 12 (trades) x 20 (potential trades) = c.6,250 pips of risk.</li>
 	<li>6,250 pips = $6,250 of risk x 50% to cover margin calls.</li>
 	<li>Funds in this broker account to trade BOT trades = $9,375.00 ($9,500.00)</li>
</ul>
I will protect profits to reduce RISK EXPOSURE, but you must ensure that your broker account is adequately funded to compensate and allow for the potential RISK multiple trades can build up.

If you really want to participate in these trades it is vital that you position size effectively and approximate your risk from day one with your eyes wide open. Remember you can trade with just one micro lot $0.10 (£0.10, A$0.10 or €0.10) per trade. These smaller position sizes still allow participation but at the same time severely reduce risk. As you should know the GBP is volatile at the best of times never mind this period of enhanced uncertainty.

<u>REPORTING:</u>

For now, I will report these trades separately under the BOT prefix and they will have a separate section under the FUNDAMENTAL TRADES excel spreadsheet.

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<u>SUMMARY:</u>

You will notice one or two disconnects between my thoughts on the charts and the actual initial set of trades. I apologise for this, but on my fourth run through I wanted to look in more detail on smaller minute charts.

What I decided to do in the end was for the GBP/USD, base both initial trade set ups off pullback entries. For the other 10 trades (5 for each cross rate), one entry was based upon a pullback and one was a momentum trade entering through previous support, or in the case of the EUR/GBP previous resistance. The momentum trades are a little more risky but I feel that the opportunities are there to take. The problem is that the pullback entries just may NOT trigger as the GBP is under so much scrutiny.

There are greater than usual RISKS involved with these trades. Many may argue greater than POSITION TRADES because they are all based around the GBP currency.

I will have my BOT trades in a separate account to measure performance.

To give you an idea of risk I am looking at no more than 15% - 20% initial position sizes, if the trades gather traction, then I will increase.

My thoughts at this time are that we should have about 9-12 months worth of trading opportunities with these trade set-ups. This time period can of course alter and needs to be fluid.

Should my macro view play out; early in 2017 we could see another UK referendum taking place in May/June 2017. Should this be the case we will have the possibility of more FALLOUT, or maybe just the retracement spike of the century to trade with!!

From a RISK perspective, once again, please ensure that your account can cope with these extra trades.

Scott Pickering
The Pip Accumulator
Tuesday 26<sup>th</sup> July 2016.

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