Volatility has ruled the markets since the UK referendum on June 23rd 2016.
Brexit isn’t the only situation causing uncertainty in the equities markets and I expect the markets to remain volatile for the foreseeable future.
Result of the referendum
More than 30 million people voted and the turnout for the referendum was 71.8%. Everyone of voting age in the UK was allowed to vote on whether the United Kingdom should leave the European Union (EU).
“Leave” ended up winning the vote by a close margin (52% vs. 48%). Voters in England (53.4% vs. 46.6%) and Wales (52.5% vs. 47.5%) supported leaving the EU, while Scotland (62% vs. 38%) and Northern Ireland (55.8% vs. 44.2%) supported staying in the EU. There was a clear divide across the UK leading up to the referendum date.
David Cameron has stepped down and Theresa May is the new prime minister. The UK has to invoke “Article 50 of the Lisbon Treaty” to initiate the split. After invoking Article 50 of the Lisbon Treaty the UK and EU will have two years to negotiate the split and agree to terms, which means there is no immediate risks.
Mrs. May has already stated that she won’t begin the process before the end of 2016. It has been suggested that the UK could finalize the split with the EU by December 2018, but that’s only speculation. It could take years before Brexit is finalized, which means the markets will likely remain volatile on any big Brexit news.
How are markets reacting?
Initially, Brexit caused massive losses across global equity markets. An estimated $3 trillion of value was erased within weeks after the vote, but the majority of shares have already rebounded to pre-Brexit highs. The value of a pound remains down against other major currencies and a quick rebound is unlikely.
Trading binary options in volatile markets
New to binary options? Learn about binary option brokers before you start trading.
We don’t endorse jumping out of markets. Rather, we recommend sticking to your long-term trading plan. However, with the market volatility were experiencing, there’s profit to be made with binary options. When you trade binary options, you’re predicting where the market will move (Up/Down) in a predetermined amount of time (IE: 24 Hours).
There are binary options that expire in as little as a minute, but timing the market on short expiry times is tougher than longer expiry times (1-24 Hours). However, if your charts are showing a strong trend, short expiry binary options have a better payout percentage, which means you’ll make a bigger profit on your winning trades.
The good thing about binary options in volatile markets is that you know what your exact risk is on every trade, whereas with other trading instruments your exposure is more than the initial investment amount. This rings especially true if you trade leveraged instruments. You can also utilize binary options to hedge volatile news.
Traders can expect a lot of market movements’ post-Brexit and vigilant traders will take advantage of the opportunities that are presented to them. If you trade currencies with your binary option broker we advise you to be cautious. The GBP is one of the world’s major currencies and there’s a lot of uncertainty on the strength of the currency.
To conclude, Brexit isn’t going to be wrapped up anytime soon and markets will remain affected. Make sure you adjust your trading plan and look to benefit from market volatility once you feel comfortable with the direction of prices.