EC How To Trade All The Brexits Of Your Life

First of all, props to George Soros who at 80-plus still has more trading skill in his head then all the armies of quants and fraternity boys at every bank trading floor in the world. He saw the asymmetrical risk and he took it and I think I understand why. Like all East Europeans (yours truly included) he has a particularly dark view of human nature. He always bets on the unfortunate tendency of most human beings to make the absolute worst choice possible. Given the fact the many of the low information voters in UK are apparently only now starting to google the words “European Union” and only now starting to understand the full implications of the actions, Soros is once again proven right in his views.

But this is not a column about “have a hunch, bet a bunch”. In fact quite the opposite. Last night K and I hosted a 4 hour live trading session that was undoubtedly the best of our lives. Not because we made a huge amount of pips. We did well (blotter below) -- but many of traders in the room made four, five even six times the amount of pips we banked.

(Click on image to enlarge)

Screenshot 2016-06-23 23.52.30

The thing that made last night’s session especially sweet was that we finally put all of our trading skills to work in what was surely the test of the century.

So allow me to deconstruct the key ideas that made trading Brexit such a success so that we may all make them our best practices for the future.

1. Trade small.

Yes, yes, yes I know that I drone on about this point to the level of ridiculousness but it cannot be overestimated. Brexit night was the single most volatile night in the history of the pound. If you traded with so little as 5X leverage you would have been margined out at least 10 times in a period of three hours. I traded at 0.5 lever all night long and never once felt any pressure in what was the most turbulent market in years. In fact the proudest moment of the night for me wasn’t in hitting 10 trades in a row, but in blowing out of my position the moment I realized that was 4X too large by accident. You can hear me on the video saying, “I don’t care if I am right or wrong I just want to be out.” Which was probably the smartest thing I said in years and will forever now become my mantra when I trade these events. Making the wrong size trade and then stubbornly trying to trade your way out of it is precisely how all traders fail. Nick Leeson anyone?

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Alex Gennaro 2 years ago Contributor's comment

If you trade with the facts, you follow the crowd. You need to develop a thesis and either stick with it or get out of the trade immediately when you realize you're wrong. I came in believing the Brexit side would win, mainly because Nigel Farage has done an excellent job rallying the people behind his cause. Generally, there has been a growing tide of populism in Europe, and people are tired of bureaucrats in Brussels running their country. This enabled me to position myself aggressively before the results came out.