The British parliament enacts Article 50 to leave the European Union, many traders are concerned about how Brexit is going to impact the GBP, the Euro and many other currencies. There are a number of things you have to be aware of when it comes to preparing your trades involving Brexit-impacted currencies. Your goal should always be to trade in the market with as little risk as possible.
The SMA Plan
The slow moving average or SMA strategy is a good option to consider. This is where you take the moving average on a pair and multiply it by 7, 14 and 21. You will have to review how the pairs move in accordance to that average.
You can buy or sell in the direction of the 7 SMA when the price goes through the 21 SMA value. This is a sign that a trend is going to start. Meanwhile, you should get out on the pair when the price goes back through the 7 SMA total.
This option works well when you’re analyzing currency pairs for an extended period of time. While you can review pairs within a day on this, it is better if you check on pairs with at least a good week’s worth of data on hand. This will make a difference for long-term positions.
Review Highs and Lows with Stochastic Totals
The stochastic indicator should be analyzed based on the highs and lows of a particular pair. Stochastic lines near the bottom of a chart can help you look at how much time it takes for a pair to move from nearing a low point to getting back out from that low point. The same can be used at the top to see how a pair might get near the end of its growth period.
This can be used for any period of time. This especially works when you use stochastic indicators over an extended period to compare the time period between peaks and valleys for a currency pair. It can be particularly helpful if you’re looking at a pair where the value has not skyrocketed or made any substantial changes over time.
Analyzing Bollinger Bands
Bollinger bands work well when you are preparing your trades following Brexit. Check on how peaks and valleys on a pair move about on the bands. Look at how long a price will go beyond one of these bands and see how it comes with the opposite end. For instance, the increase in a currency’s value above the high might last longer than when the currency goes below the lower band.
You can exit a trade if it goes at least 5 to 10 pips beyond a band for an extended period of time. This could be a sign that the band structure is about to change dramatically. It could also be a sign of instability or volatility within that pair.
Good luck with your plans for trading in the new Brexit era. The process for the UK actually leaving the EU is now under way, so carefully watch how you’re reviewing your currency pairs at this time.