The boom in the USD value against the JPY started in March, with the price moving above the highest point of last year. This was an early and vital sign of a bull trend in play.
The USD price is now trading at levels not seen since 1998.
5% of this 25% bull run has occurred since my last post in July.
Below I have the monthly timeframe.
Many investors go wrong trying to find meaning behind the climb in the price instead of prioritising making a profit.
There could be a whole manner of reasons as to why the USD is increasing from:
- The FED and its relationship with global central banks
- The unfortunate situation in Ukraine
- Decreasing oil prices
- Recession
- The energy crisis
- The stock market stagnating.
- Gold trading in an 11-year consolidation
It could be one of these reasons or a combination of them. The more you try to make head or tail of this situation, the further you deviate from what matters, ensuring your portfolio performs.
You are not paid to write your opinion pieces as an analyst is.
Instead, stay true to the mantra; the trend is your friend until the bend at the end.
Once the price of an asset dictates a direction, you want to hold your positions in that direction until the market reverses and hits a well-placed trailing stop-loss (TSL).
A well-placed TSL:
- Is wide enough not to be triggered by pullbacks in the trend such as the one we saw through the latter half of July. Price recovered nicely and is now printing highs not seen in over 20 years.
- When triggered signals a reversal in the market and not a pullback or correction.
My preferred method of calculating a TSL is to use the Average True Range of the asset and a multiplier. For example:
- ATR over five days x 4
- ATR over 1 month x 3
You will want to play around with this until you find a system that keeps you in positions for weeks to months, potentially even years.
It is not uncommon for the TSL setting I use to keep in positions for 12 to 24 months. I have automated the process with a tool I have created, so all I need to do is update my broker account with the price value that the TSL tool is displaying. Simple and easy.
This method of managing your positions removes emotions, allows for compounding when trends are in play and follows another mantra of sound investing, cut your losers short and let your winners run.
If the UDJPY breaks through 150, we can expect the trend to push further.
I am now simply managing my open positions, which have been in play for several months and will continue to compound as the trend develops.
Image sourced from Shutterstock
