Guide to Trading the British Election Result

With only a few hours to go before the polls close as at the time of writing, I believe it is clear the Conservatives will win a landslide victory in this election, rivalling the majorities achieved by Margaret Thatcher in the 1980s.

The Conservatives have not won big since 1987, so this would be the first such result in 30 years. Betting odds are implying a majority between 100 and 125 seats.

As the market is already well convinced of this result (note the bullish channel the GBP/USD currency has been established within over several days), and as any significant alternative scenarios are very unlikely, there is less to say about trading the election result that I would prefer. There are still a few things worth watching for:  UK Elections

  1. It is possible to place a bet with betting companies such as Betfair (depending upon your country of residence) on a Conservative majority as an outcome. This only has a payout of 18% however, at present, and it is likely to narrow further as we get closer to 10pm London time tonight.
  2. The Pound will probably go up a little further, perhaps spiking to 1.31 or 1.32, if a Conservative landslide is confirmed by exit polls due at 10pm London time. The Pound is unpredictable and likely to be very volatile, which is why this “trade” is probably better executed as a binary bet with a bookmaker and not in the Forex market.
  3. If the exit poll at 10pm will suggest the Conservatives short of a majority by more than 10 seats, this will mean a sudden switch to an expectation of a Labour government, and the British Pound and stock market will fall sharply. In this very unlikely event, keep in mind that it will be 2 hours more before any actual results are announced which will confirm or deny the exit poll result. A predicted hung parliament will be a very fine balance, statistically, and a small error could make an enormous difference to the result. Therefore, I suggest waiting until the first “marginal” result confirms a Labour government would be likely, and shorting the British Pound against Gold if possible, or against the U.S. Dollar is not. Use a very wide stop loss and extremely small position sizing.

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