From the Desk of Ian Culley @IanCulley
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…
Check out the US dollar/Swiss franc pair:
It’s a hot mess, trading near the upper bounds of a decade-long consolidation.
A decisive close above the 2017 high near 1.0350 would flash a strong “buy” signal. But we have to imagine an increase in volatility at this multi-year resistance level.
I’m not crazy about trading that breakout. Instead, I like the setup when we zoom in on the daily chart:
The USD/CHF has been carving out a base since May. It broke to fresh highs last week, finding resistance at a key extension level of 1.01.
That’s my entry level, not 1.0350. I want to buy a break above last week’s high in anticipation of a more significant breakout above the 2017 highs.
If and when we get it, I’m long USD/CHF with a target of 1.0825. But I’m still weary of overhead supply. Plus, the US Dollar Index $DXY is likely entering the latter stages of a parabolic advance if this scenario plays out.
I don’t want to press longs and get greedy at this stage of the dollar rally. With that in mind, I want to feed the ducks half my position at 1.0350. That way, I lock in some profits.
If price is rejected at the 2017 highs, no big deal.
On the other hand, I can always add leverage if it rips above 1.0350 to fresh 12-year highs.
Trading is a balancing act. We must stay true to our philosophy and trading plan while remaining nimble and protecting capital.
I follow trends. That’s what I do, even when every ounce of my gut tells me it can’t possibly last.
It’s not always easy. But I’ll continue to follow the trend in the US dollar until a reversal has been signaled.
Thanks for reading.
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Allstarcharts Team