Tuesday, March 3, 2015

Mailbox

Mailbox
Question:

Eric: Your choice of terms sometimes seem quite confusing. Leverage to me speaks of borrowed money that increases the size of a trade. What do YOU mean to convey by using the chart demo you call "Leverage"? In your "Leverage" charts the inverted meanings of "Bull Phase" and "Bear Phase" become directionally confusing. Couldn't you invent 2 other terms that would be less confusing? Your work, regardless, is a help! Regards, Richard

Answer

Price is price. Leverage is price geared up. We follow leverage, because this gearing gives it leading tendencies.

Understanding the movement of money is not easy. Price, leverage, time follow cycles. Price cycles are easy. Price goes up. That's usually good for everyone. The flow of money in leverage, however, is different.

Leverage, the gearing provided by futures and options, moves in the opposite direction. For example, positive cycles or bear phases, a depiction of steady accumulation by the invisible hand over time, is bearish until concentrated. It's this concentration that eventually flips the phase to bull and changes the flow of leverage and price.

Reading the message of the market gets easier as the mind recognizes the cycles. Hopefully the new design speeds up recognition.

When the message of the market agrees in price, leverage, and time; for example, bearish, bear phase, and weakness, the outcome is usually bearish. When the message of the market doesn't agree, it usually pays not to force a position.

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Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.