Video Transcript:
Hello everyone, it’s Dale here, and in this video, I’d like to talk about how we as traders can approach trading around the U.S. presidential election. What you see before you is the website of Polymarket, one of the largest betting companies. Right now, you can see that according to them and their data, Donald Trump is leading. According to their figures, there’s a 61% chance that Donald Trump will win and a 39% chance that Kamala Harris will win.
Now, I wouldn’t advise you to take this as a leading indicator, but Polymarket is one of the biggest betting companies, so it can at least tell us how they view the election. Yesterday on my YouTube channel, I conducted a little poll on who will win the election, so let me show you the results.
Here is our poll. We have three candidates: Donald Trump with a 63% chance of winning, Chuck Norris with a 22% chance (though I believe his chances are much higher), and finally, Kamala Harris with 15%. Alright, so that’s our little poll on our YouTube channel. However, despite the results, I think there’s no doubt about Chuck Norris winning the election.
Now, let me quickly show you the outcome of what would happen if he wins. If Chuck Norris wins, things will be very simple. Regarding currency, there will be only one currency: it will be called the “Chuck Buck.” This is how it will look, and the exchange rate will be straightforward: one Chuck Buck will be worth everything. For stocks and indices, everything will instantly reach its peak value, because nothing goes down when Chuck Norris is in charge.
In the unlikely event that this doesn’t happen, let’s look at the other two candidates. Here’s a table showing the scenarios of what I think would happen if either candidate wins. If Trump wins, the U.S. dollar should strengthen as markets will expect a pro-growth policy. The Euro might weaken relative to the U.S. dollar, as the U.S. could become more attractive for investors. Now, the Japanese Yen is a bit trickier, but my guess is that the Yen might depreciate, as it is a safe-haven currency and demand for safe-haven assets could decrease if Trump wins.
For indices like the S&P 500 and other American stock indices, if Trump wins, they should go up as investors would expect pro-business policies, such as tax cuts and reduced market regulation. If Harris wins, it should be the other way around.
Here’s how we as traders can approach this. If Trump wins, we should go long on U.S. pairs like USD/CAD, USD/JPY, USD/CHF, and also on indices. We should go short on EUR/USD, AUD/USD, and GBP/USD, meaning that the U.S. dollar and indices will strengthen. If Harris wins, it’s the opposite: long on those pairs and short on these, including indices.
Now, let me switch over to the charts to show you the kind of volatility and reactions we as traders can expect. What you see before you is the EUR/USD daily chart. This red candle I highlighted is from the 2020 presidential election when Biden won. As you can see, the volatility wasn’t too crazy. Not much happened initially, but after the election, the U.S. dollar started to weaken, with the EUR/USD going up, indicating a weakening dollar.
If we scroll back to 2016, when Trump became president, this was the reaction: a 400-pip range on EUR/USD. That day was pretty wild, and afterward, the U.S. dollar started to strengthen immediately, with EUR/USD going down, meaning the dollar was strengthening.
This is the kind of reaction and volatility you can expect. Now, let’s switch to indices and take a look at the ES, which is the futures for the S&P 500 Index. This is the 2020 election when Biden won. As you can see, there was a selloff, but nothing too extreme. There was increased volatility, but the market continued its uptrend afterward.
Let’s scroll back to 2016, and here’s what happened on the ES when Trump won. I hope you can see it, but this is a pretty massive candle. First, it went down, and then, when it was clear that Trump won, the index went up and started a new uptrend. It was pretty wild back then, and as traders, especially if you traded this, you should definitely be prepared for similar volatility.
My recommendation for you would be to close your intraday and swing trades today because it’s very hard to predict how the markets will react to the election, and things can get wild. But if you decide to trade, my final tip is to look at the chart. Let the chart tell you what to do, not the fundamentals. Take this advice from someone with a degree in finance, where it was all about fundamentals. Let the charts tell the story, and adjust your trading based on that.
So, I hope you enjoyed the video. If you did, hit the like button and subscribe for more. If you want to level up your trading game, visit my website, Trader-Dale.com, and click on “Trading Course and Tools” to get my custom-made trading indicators and courses. If you want to trade with me and other prop-funded traders in a live room every day, click the button labeled “FTA” for the Funded Trader Academy. There’s a video there where I’ll explain everything, and if you’re serious about this, book a call with us. We’ll walk you through it in a one-on-one meeting, so you can decide if it’s right for you.
Alright, that’s about it. Thanks for watching, and I look forward to seeing you next time. Until then, happy trading!
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