Not an On/Off Switch. A Volume Knob.
Exposure doesn’t have to be binary.
The world is filled with “either/or.”
The simple, two-choice question is a heuristic; a shortcut used to come to a quick decision. A binary option with no middle ground and no other possibilities.
On or off?
Hot or cold?
Black or white?
Democrat or Republican?
Bull or bear market?
But the world is rarely that simple, and markets don’t operate in absolute terms.
Price is relative.
When the quote says the S&P 500 closed the day up or down 50 points, that’s 50 points away from the previous day’s close. The same relativity holds true when analyzing the overall market or individual securities.
The absolute price level is worth knowing, but the real value comes from identifying the trend. In which direction are prices moving? That is the question that matters.
It’s not necessary to declare a Bull or Bear market.
We are better served by asking whether the action is bullish or bearish. That distinction creates flexibility in execution and supports better decision making.
Market exposure doesn’t have to be an “on/off” switch. It’s a volume knob.
Positions can be adjusted based on conditions:
Increase risk when price is behaving constructively and reward-to-risk is favorable.
Reduce risk when structure weakens or momentum fades.
Scale exposure up or down in tiers rather than making dramatic shifts.
It may make sense occasionally to be “all in” or “all out.” Your written trading plan should clearly define those circumstances. But most of the time, incremental adjustments outperform emotional reactions.
Binary thinking leads to emotional positioning.
Relative thinking reinforces process.
So the next time someone asks — or tells — you it’s a bull or bear market, shift the question. Are prices behaving constructively, or are they deteriorating? The answer determines how much volume you apply.
When pressed for a simple yes-or-no answer on interest rate policy, Federal Reserve Chair Jerome Powell refused to reduce it to that: “I don’t do ‘yes’ or ‘no’ on policy interest rate hikes. That’s a serious question. And I can’t tell you because I don’t know all the facts.”
Markets are complex. Serious decisions rarely fit into yes-or-no boxes.
You don’t need an on/off switch.
You need a process, defined risk, and the discipline to adjust exposure incrementally.
You need a volume knob.
Postscript — Why This Still Matters
In stronger trends, the volume knob naturally turns higher. When conditions become mixed, extended, or rotational, the knob turns lower. That adjustment is structural, not emotional.
The market is not asking you to predict. It is asking you to respond.
Defined levels.
Defined risk.
Incremental adjustment.
That is how capital is preserved, and how it compounds.
If you like how I think here, this is where that thinking is applied every day.
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