It’s been a few months since the Brexit vote, in which the citizens of the UK elected to part-ways with the European Union, yet its effects on the global economy are still very much apparent. Following the vote, the British Pound crashed 9% and literally trillions of dollars were wiped off the global stock market. However, investors on social trading platform eToro seemed to come prepared, with an average return of 2.4% on the day of the Brexit.
Many finance experts believe that the reason for the catastrophic losses suffered in global markets on the day of the Brexit is that a lot of investors simply didn’t believe that the British people would vote “yes.” After the results were in, and people understood the consequences of the vote, leading to a whole new reality in the European market, many investors lost faith in the British currency and withdrew funds from British assets.
On eToro, traders that were surveyed regarding the Brexit vote actually had a pretty good idea. 52% of traders said that they are expecting a “yes” vote, which made them prepare and react accordingly. Therefore, while shorting the British Pound was a gamble that paid off for those who made it, the majority of eToro users prepared otherwise, using lower-risk tactics.
Better safe than sorry
An apparent trend ahead of the vote was investing in safe-haven assets, such as precious metals, which are usually perceived as an alluring alternative to currencies when the market shows high volatility.
Alongside withdrawing funds from the GBP, UK-based stocks and the FTSE index, another approach that was seen in foreign exchange investors was buying U.S. dollars, as it proved to be more resilient than the GBP and other European currencies. This overall cautious trend is the main reason eToro clients profited overall, despite the severe losses suffered in global markets.
The Brexit vote didn’t only serve as an opportunity for people who were already a part of the online trading world, but also gave many people their starting point. The numbers show that a record number of new clients joined eToro on the day before the vote, and on the day of the vote, many of which began trading and Copy Trading immediately.
he story of the Brexit vote on eToro is a good example of how experience traders (and those who copy them) can stand firm even when the market is in turmoil. While it is certain that a number of people made incredible profits by betting that the GBP will crash, those who took a safer approach still made a profit that day, without taking unnecessary risks. By not succumbing to a gambler’s approach, and sticking to more solid investment options, eToro traders have shown that when it comes to online trading, remaining calculated and preparing for every option pays off.
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* Past performance does not guarantee future results.
* This post is not investment advice.