Traders around the world want to know the strategy to trade the UK election. Although there are many different ways to play the outcome of the election, which is more than likely to be a hung parliament, however, the below strategies are probably more commonly used given the circumstance.
Back in 2010, the GBP/USD pair bounced back fairly rapidly after the election. However, in order for a similar event to take place again, we have to assume that whichever party wins the election, it will be able to form a coalition without delaying or wasting time. Under this scenario, the GBP/USD pair which could see a sell off more than 4% due to a hung parliament could be a buying opportunity.
Another strategy is to use your sell stop order and this trade is also known as chasing the move. Although, it is not highly recommended, but this trade is usually based on momentum and this momentum is mostly in its last episode of a sell off but despite this, it can have large spike moves. The strategy in this case could be place the sell stop orders below the 200 to 100 pips of the market price and a knee jerk reaction due to a hung parliament could get you on board and the move can extend for another 200 pips.
Finally, if you are more than confident with your risk to reward ratio, you can always sell the GBP/USD during the consolidation mode today and after the polls close, the
downward spike for the GBP could add some ample reward in your portfolio.