This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
To use phase, we must first understand what it is. Put simply, phase is a description of where we are in the cycle. Are we at the beginning, middle or end of the cycle? Phase is a quantitative description of that location. Each cycle passes through 360 degrees to complete the cycle. One basic definition of a cycle is that it consists of an action having a uniform rate-change of phase. For example, a 10-day cycle passes through 360 degrees every 10 days. For it to be a perfect cycle, it must change phase at the rate of 36 degrees per day each day throughout the cycle.
How does this help us see a Trend Mode? Easy. By reverse logic. In a Trend Mode, there is no cycle, or at the very least, a very weak one. Therefore, there is no rate change of phase. So, if we compare the rate change of measured phase to the theoretical rate change of phase of the weak dominant cycle present in the Trend Mode, we get a correlation failure. This failure to correlate the two cases of the rate change of phase enables us to define the presence of a trend. Because we know that we have a trend, it is easy to set our strategy to a simple buy-and-hold until the trend disappears.
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
