Brexit episode a trading experience one doesn’t get from a book

Extraordinary market movement

I can only describe forex and stocks trading last week and this as extraordinary and bizarre. Consider the following:

  • Huge movement in the market. GBPUSD prints new low in 30 years and GBPJPY was down 15% in one day.
  • I fail to see why markets rallied the way it did during the period between British MP Jo Cox’s murder until the night before the big day. There was no technical reason for a market rally and therefore no surprise that the referendum results after led to a huge bull trap.
  • Downright bizarre is the fact that 3-days after, FTSE is in the green for 2016 and has recovered entire Brexit losses. At this moment FT100 is printing 6298.

 

 

Set correct expectations

Traders in both bull and bear camps lost money. However I think that one should look at these losses with the correct mindset.

  • Wins and losses are part of the game; if you can’t lose psychologically or money-wise you don’t belong to this game.
  • Even the best money managers have down days. Those who expect 100% wins are just wishful thinking and in my opinion, total amateurs. In addition, to judge one’s performance, one must look at trend over a period of time. Declaring a winner or loser based on the outcome of this incident is just taking a snapshot that is wrong.
  • One can win money for the wrong reasons or lose for the right ones – after all the market is a moving target.
  • Take a look at this chart of GBPUSD – does this look like an ordinary week?

    Brexit volatility on weekly and daily charts

    Brexit volatility on weekly and daily charts

 

Congratulations, this one goes to your experience bank

""If you lost don’t despair. Examine your processes. Reinforce the right elements and throw out wrong behaviour. Congratulate yourself that this is a kind of encounter one doesn’t get from a book or a classroom – the knowledge that you gain will go to your experience bank which is a resource you can call on in future.

Award yourself a campaign medal for your participation I say.

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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