> It's actually the opposite, sorry if that was not clear. Long > positions are entered when the short term balance is greater than a > longer term balance and is above a certain threshold. Short positions > are entered when the short term balance is smaller than a longer term > balance and is below a certain threshold. This is actually in line > what I designated as the Econ 101 principle, but I also designate > these as anti-trend strategies because the long and short entries tend > to coincide with the price reversals. Hope this makes sense.
Now that I've attempted to explain the role of balance as the indicator, I'd like to also explain how the price is used. Specifically, the Tension indicator takes *both* balance and price into consideration, and there is evidence that it performs better than an indicator which only considers balance (or only price). So, let's go back to Econ 101 for a moment. When the demand rises, the prices rise. This is not instantaneous adjustment, but rather a continuous process. As prices rise, there are less and less buyers willing to pay the higher prices, so as the price continues to go up, the demand subsides. At some point in time, there is no interest in buying at all, and the interest in selling accelerates. This is what I call a "high tension" point, which is also very commonly known as the "resistance" level. At the high tension point, the price went up considerable, and balance went down considerably. In fact you can measure how "tense" things are by this formula: tension = (fastBalance - slowBalance) - (fastPrice - slowPrice) the terms "fast" and "slow" correspond to the shorter and longer term exponential moving averages of the balance and price. If you look at the Tension indicator, you'll see that's pretty much what it does. So, in terms of the traditional technical analysis terms, extreme positive tension is the "support", and extreme negative tension is the "resistance". -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en.
