Momentum is at the core of our framework at Bleeding Edge Macro. As a veteran trader and former central banker, I have a deep understanding of macroeconomics and the narratives that drive markets. But as trend trader Brian Shannon famously says, "Only price pays." Fundamentals and narratives may shape expectations, but ultimately, market movements determine outcomes.
We use momentum not just to identify the prevailing market regime but also to infer emerging narratives and fundamental shifts by analyzing changes in macro asset class momentum. Put simply, our macroeconomic knowledge informs us how assets should behave under certain conditions. When real-world price action deviates from those expectations, that deviation itself becomes a valuable signal worthy of further investigation.
Momentum, however, is more complex than it first appears. This challenge is similar to the one Benoit Mandelbrot described when analyzing the coastline paradox: the measured length of Britain’s coastline is infinite because it depends on the scale of measurement. This insight led to the development of fractal geometry.
The same principle applies to momentum. If you open a chart and see an uptrend—price moving from the bottom left to the top right—it may appear bullish. But zoom out, and suddenly, the price action looks range-bound. Zoom out even further, and you might realize the larger trend is actually bearish, stretching from the top left to the bottom right. Momentum is highly dependent on the timeframe you choose, making it a slippery but crucial concept to measure correctly.
Our proprietary momentum indicator is designed to overcome this challenge. It analyzes momentum across multiple timeframes, applying advanced mathematical techniques to weight the results appropriately. We then scale the measurement by the volatility of the asset class, allowing for meaningful comparisons across different markets and investment horizons.
In this short video, we’ll show you how to add our indicators to your chart, explore their configuration options, and demonstrate how we use the Parabolic S/R indicator to identify potential breakout levels that may later act as support or resistance.
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