To The Moon

In recent weeks, the market has been buzzing about the extraordinary rally of $Trump Media & Technology(DJT)$, which has surged more than 100% for MTD October. With the political spotlight shifting toward the 2024 US Presidential Election, investors and traders are speculating that this rally might be fuelled by the increasing odds of Donald J. Trump winning the election.

I want to take a step back, evaluate the situation logically, and think about how a trader like myself would position around such events. Politics and markets are often intertwined, but the moves they create are rarely as straightforward as they appear on the surface. Here’s how I break it down.

1. The Relationship Between Politics and Asset Prices

The price action around politically charged events often resembles a rollercoaster: thrilling, volatile, and occasionally unpredictable. Trump's potential return to the White House is already becoming a factor in market sentiment. However, when sentiment drives prices, it often creates inefficiencies that can be exploited by quantitative strategies.

The core challenge here is separating noise from the signal. While media narratives amplify election outcomes, the long-term price trajectory of assets tied to political events depends less on hype and more on policy substance, macroeconomic effects, and institutional responses. A 114% rise signals heavy speculation rather than fundamental strength. This opens opportunities but also warns of elevated risks.

2. Mean-Reversion vs. Momentum: Which Strategy Wins Here?

The recent DJT rally looks like an outlier event, with over 100% gains in such a short window. There are two ways to approach such extreme moves:

• Momentum Traders would see this as a sign that the trend could continue, possibly betting that positive sentiment toward Trump will fuel further upside. If Trump’s odds continue to increase, there could be sustained bullish interest until Election Day, similar to how markets react when policy-sensitive sectors rise on favourable election outcomes.

• Mean-Reversion Traders, on the other hand, would argue that this level of rise is unsustainable. Overbought assets tend to correct sharply, especially when driven by emotional or speculative trading. The RSI and other momentum indicators likely show overextension, signalling an eventual pullback. Timing the top becomes the key challenge for this strategy.

Both strategies are valid, but the right approach depends on understanding how price elasticity works under political influence. Markets like these tend to swing violently, which makes both long and short positions viable if timed correctly.

3. Should You Bet on Election Outcomes?

Betting solely on election outcomes is risky, especially since markets tend to price in expectations ahead of time. Remember the shock in 2016 when Trump’s victory initially triggered a market sell-off, followed by a rapid recovery that evolved into one of the longest bull markets in history. Similarly, relying on a linear relationship between Trump’s election odds and DJT’s performance may leave traders exposed to sharp reversals.

Instead, I suggest event-driven trading rather than pure directional bets. This means focusing on:

• Volatility trades: Use options strategies like straddles or strangles to capitalize on anticipated price swings without needing to predict direction.

• Pairs trading: Hedge a long position in DJT with a short position in a related asset or sector, such as technology stocks that might underperform if Trump wins.

• Risk management: Keep position sizes smaller than usual, as politically sensitive assets are highly prone to sudden news shocks.

4. Election Catalysts and DJT’s Future Path

Markets move fast, and political narratives evolve daily. A single debate performance, legal development, or change in polling data could flip market sentiment overnight. Leading up to the election, expect DJT to stay volatile, with potential bursts of further upside if Trump's momentum builds. However, after such rapid gains, it’s equally likely that profit-taking will set in as traders lock in their winnings.

If you are bullish, a reasonable approach would be to scale into positions cautiously rather than chasing the rally at current levels. Setting clear profit targets and trailing stops can help protect gains. On the other hand, if you believe this rally is overextended, building a staggered short position with tight risk limits may allow you to profit from an eventual correction.

5. My Positioning Strategy

Personally, I prefer a neutral-to-slightly-bearish stance at this stage. The magnitude of the recent surge suggests that much of the optimism is already priced in, leaving room for disappointment if expectations don’t align perfectly with reality. I see three clear paths forward:

1. Short-Term Scalps: Given the volatility, I’ll take advantage of intra-day swings by scalping small moves, rather than committing to a long-term directional trade.

2. Options Strategies: A straddle on DJT allows me to benefit from volatility without guessing the direction, as election developments could send prices soaring or tumbling.

3. Mean-Reversion Play: If DJT continues to rise sharply, I’ll look for technical confirmation of exhaustion (e.g., bearish divergence on RSI) and start scaling into shorts.

6. The Bottom Line: Stay Nimble

Trading politically sensitive assets like DJT requires a balance of strategy, discipline, and risk management. While the narrative of a Trump election victory is undoubtedly powerful, markets are forward-looking and fickle. FOMO (fear of missing out) can be costly, and emotional decisions rarely end well. Whether you go long or short, keep your focus on price action rather than emotions, and manage risk rigorously.

Remember, this is not just about picking sides politically or financially. It’s about staying nimble, adapting to the information as it unfolds, and executing your strategy with discipline. I won’t bet purely on Trump winning the election — instead, I’ll bet on volatility, irrational behavior, and the market’s tendency to overshoot. That’s where the real edge lies.

Good luck, trade smart and please DYODD!