Building Wealth with Oliver Velez: A Guide to Core Trading

The Principles of Long-Term Trend Following

Core trading is about building long-term wealth. It is the new form of investing. A core trader is a trend follower, looking to capture the majority of a major market move. This style requires patience, discipline, and the ability to think in terms of weeks and months, not minutes and hours. The core trader is not concerned with the day-to-day noise of the market. They are focused on the big picture.

Using Weekly Charts to Identify Major Trends

The primary tool of the core trader is the weekly chart. The weekly chart filters out the noise of the daily and intraday charts and reveals the true underlying trend. A core trader looks for stocks and ETFs that are in a clear uptrend on the weekly chart. They use the 20-week and 50-week moving averages to identify the trend and potential entry points. A pullback to the 20-week moving average is a buying opportunity.

Building and Managing a Core Portfolio

A core portfolio should consist of a diversified basket of stocks and ETFs that are in long-term uptrends. Velez is a proponent of using ETFs like the SPY (S&P 500), QQQ (Nasdaq 100), and DIA (Dow Jones Industrial Average) as the foundation of a core portfolio. These ETFs provide broad market exposure and are less volatile than individual stocks. A core trader might allocate 60% of their portfolio to these ETFs and the remaining 40% to individual stocks that are exhibiting strong relative strength.

The Psychology of a Long-Term Investor

Core trading requires a different psychology than other styles of trading. A core trader must be able to withstand the inevitable pullbacks and corrections that occur in a long-term uptrend. They must have the conviction to hold on to their positions for weeks, months, or even years. This requires a deep understanding of the market and a belief in the power of long-term trend following.