I don’t care what your favorite TikTok financial guru says: Trading isn’t easy.
The market has made this point again and again this year.
The market has also driven home another essential truth: Trends persist.
I talk about this approach quite a bit because I’m a trend-follower. It’s my favorite Dow Theory Tenet, and it's the foundation of my approach to the markets.
Trend-following might sound simple. But it’s far from effortless. Like any worthwhile philosophy, real-world applications can sometimes be a struggle.
In fact, no other market has tested my trend-following resolve quite like this year’s unstoppable dollar. And I’m still looking for opportunities to get long…
One of the most valuable tactics I’ve learned in my career is the ability to capture a strong trend as it’s trending.
I’m not talking about FOMO buying or blindly chasing breakouts.
In my experience, buying strong trends requires patience and discipline.
Today, exercising these two key traits is especially necessary if you're trading the explosive US dollar.
Navigating the latter stages of the dollar rally presents challenges, particularly in dealing with heightened volatility. However, it doesn’t mean we can’t join in on this trend responsibly as it barrels down the tracks... or, in this case, up them.
The US dollar has been under pressure for the past five days, and investors are dancing in the streets.
I get it. A weaker dollar sits at the top of every stock market bull’s wish list. When the dollar goes down, stocks tend to go up. But don’t forget – betting against the dollar has only brought pain this year.
So, instead of joining the celebrations, I nailed down a clear-cut strategy for selling dollar weakness.
Spoiler Alert: Early sell signals are already starting to fire!
The calls for a dollar top are growing louder as analysts claim the advance is overextended.
They’re right. But pushing further into overbought territory is exactly what parabolic rallies do. And many of the technical tools supporting the thesis that the dollar is topping do not apply.
In practice, mean reversion tools such as oversold/overbought conditions, price exceeding the upper bounds of a Bollinger Band, or the percentage gain above the moving average du jour are best used in trendless markets.