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In the UK, Thursday 23 June 2016 there was a referendum in which the British had to decide whether to stay in the European Union or abandon it. It was a political event with a huge impact on the economy and finances of the entire world. Here is what happened and how some Forex users were able to earn a lot of money thanks to this event. For everyone else, here is an idea of how to use similar events for your own interests. If it happens again.

Since the end of 2015, as you can see from the diagram below, the pound with smaller fluctuations steadily lost value against the euro. In the April it reached the lowest value of about 0.8070 pounds per euro. After that, the trend began to be variable: it was two months at the referendum and the campaign for and against leaving the European Union grew stronger. The pound went up and down in relation in relation of which the political front had primacy but then something unpredictable happened. On Thursday 16 June, exactly a week before the referendum, Jo Cox, the British parliamentarian and one of the main and most active pro-European Union politicians, was killed.

Zbivanja oko Brexit-a i mogućnost zarade na Forexu

For the institutions and the population it was a shock. Following this tragic event the campaign was suspended for two days. The feeling that through the violence someone wanted to influence voters has led to the following result: a good part of those who favored the exit of Britain, changed their minds. Opinion polls have shown that the option of staying first surpassed and then gained important advantage against exit. The day before Jo Cox was killed, the release by the European Union was dominant. As you can see from the graph, the pound has begun to recover. Everyone was convinced, including financial traders, that the United Kingdom would remain in Europe. They believed that nothing will change.

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Referendum day, Thursday 23 June. The assessment was 52% for the remaining and 48% for the exit. The next day, the scenario was reversed, 52% of British have voted for the exit while the remaining 48% wanted to stay. The exit from the European Union won. Predictions were once again wrong. Why?

Prediction the outcome of elections, referenda and similar events is based on a survey of a small number of people. When selecting a group of people who will be interviewed, it tends to the fact the group faithfully represents the entire population in relation to the schedule of sex, age, education, territorial belonging and similar. Since it is a small sample, the scientists always alert to the possible error of about 3%. The Brexit error was 4%. Experts are trying to figure out whether this is standard volatility or is it some other element that influenced the wrong prediction.

After the murder of a Labour Representative Cox, staying was unexpectedly passed the exit. Many of supporters for staying thought there was no need going to vote. One vote can not change anything. That’s true but what if many people start to think in the same way? On the other hand, those for the exit went to vote trying to save they vision for the Great Britain: out of the European Union. It’s also important to consider 10% of the undecided before the referendum. They have largely voted to leave Europe. One possible explanation of this decision is that they thought was wrong that an isolated, violent political act to decide on the future of the British island.

Let's go back to the Forex and the exchange rate of the euro and the pound (for the other currencies is worthing the same analogy). After the opening of the world's financial exchanges, the pound had literally sank. In just few hours the English currency lost almost 10% of its value and as you can see from the diagram, not even to the present day (beginning of November 2016) this trend is not completely stopped. Many people who trade with currencies were desperate because they didn’t act: they could make a lot of money. In fact, a small number of traders are now rich and they drink champagne. Among them there is one of our permanent collaborator. Here is his very instructive interview. The knowledge gained by analyzing this event can be used for the future similar episodes.

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Interview

For several days I wondered how to use Forex by the outcome of the referendum. You should know that I am an engineer by profession and one of our characteristics to perform the job well is the ability to analyze the problem. I am also a methodical person and this helps when you face the problem analysis. My thoughts on the referendum went, more or less, like this.
  • If the option about leaving European Union wins, there will be no doubt that the pound will loose its value: the analysts all over the world think the same way. By using Forex lever a great earn can be achieved. So, I must sell a certain amount of pounds (preferably as much as possible, in order to increase earnings) that I will later repurchase (after the pound falls). That’s nice about Forex, you can sell things you don’t have, a so-called short position. Which are the risk if the opposite happens?
  • If staying wins, nothing change. The eventual euphoria of the world's financial centers, which could cause an increase in the value of the pound should be short-lived because, I repeat, nothing has changed. Since the value of the pound has strengthened before the referendum, it can happen to fall again and this is favorable for me.

The possible profit ratio compared to the potential loss was really in my favor, but doubts were swirling in my head. And what if I omitted something in my analysis regarding the permanence? I usually use the leverage of 1:50. If the pound falls 1%, I lose half the capital I’ve invested. It would not be a big deal but no one likes to lose the money. At the end I decided after midnight. I was watching CNN and BBC and everyone took for granted the staying in the EU.

I sell a big amount of pounds, by investing over 70% of the capital I had in account and it was not little. I went to bed where I slept like a child (as if I had some internal mechanism kept me away from the psychological pressure). In the morning I got up and decided not to watch right away the issue. I went into the car and turned on the radio. The first news I’ve heard was that the United Kingdom was out of Europe. I only had to see the amount of my profit.

In the office I have a firewall so I have to access to my Forex platform through a proxy. I almost never do that but I made an exception because I had to decide when to close my position. The value ranged. It was a bit up and then very down and I was undecided whether to take the money right away or wait. The trend could also change and I was afraid of this. At the end of the story, in the afternoon, I’ve decided to close my position by taking over 350% of invested funds. I don’t want to say how much money I earned but I can buy a new car and not the cheapest one. I hope such an event will be repeat in the near future.