An opponent-process perspective: a strong primary impulse is gradually met by an opposing after-response. In markets, an early directional surge attracts contrarian flows, hedging, and profit-taking that accumulate over time. The initial impulse dominates while participation is thin; as positioning saturates, the counterforce strengthens, producing overshoots, sharper pullbacks, and ultimately, exhaustion or reversal. This lens explains persistence, abrupt endings, and squeeze-driven extensions.
A two-phase approach that applies the opponent-process idea to trend regimes. Process A marks initiation and expansion: strong directional drift, clean structure, and pullbacks that typically resolve as traps with the trend. Process B marks deceleration and exhaustion: failed breakouts, widening volatility without net progress, and rising failure risk. Transitions are probabilistic, inferred from trap failures, loss of impulse, and deteriorating breadth. Sizing is reduced as B signals build too.
A statistical process-control adaptation for price. A rolling center line (CL) tracks trend, flanked by an upper control limit (UCL) and lower control limit (LCL) set within a ±3–4 sigma envelope. In uptrends, entries prefer pullbacks below the CL, with profit taking at the UCL and stops at the LCL. In downtrends, entries favor rallies above the CL, with profit at the LCL and stops at the UCL. Persistent nonrecoveries beyond limits warn of regime change. Tuned by asset, liquidity, and timeframe.
A short-lived break against the prevailing trend that lures traders into wrong-way positions before a swift reversal. In uptrends, a dip through LCL that snaps back is a bear trap, forcing short covering that adds buy pressure. In downtrends, a pop above UCL that fails is a bull trap, forcing long liquidation that fuels downside. Valid traps re-enter bands promptly with the trend filter intact; failures to recover often foreshadow Process B. Prompt re-entry and intact filters confirm the trend.
A measure comparing expected upside to downside on a trade. AB Process requires asymmetric setups so that potential gain meaningfully exceeds defined risk. Stops are placed at clear invalidation (e.g., LCL in uptrends, UCL in downtrends), and targets are aligned with the opposite control limit or measured objectives. By enforcing a minimum payoff multiple, the strategy can maintain positive expectancy even with moderate hit rates and tight loss control. This preserves convexity in practice.
Shorthand for payoff asymmetry thresholds. A 1:3 profile means each dollar risked targets three dollars of potential gain; 1:4 targets four. AB Process mandates at least 1:3 and prefers higher asymmetry when available. Position size is set so stop distance times size equals a fixed risk unit, ensuring losses are capped while winners have room to compound. This geometry concentrates P&L in a few outsized moves and limits drawdowns when trends stall. This concentrates gains and contains drawdowns.