Category: Money Tips Date: 2007-01-25
Tide, wave and ripple
The occupants of a beach there are tide comes in, it shall adopt to promote a coming wave in a stakes at the seaside to its highest point of the method to determine the direction of tides. Then, if the next wave to promote their stakes higher than sea water, he'll know the tide is rising. If he stakes change for each wave of the highest water level mark, eventually there will be a wave a mark in their last stops and start retracement below this level, and then he'll know the tide has been turning, and ebb started. In this way, in fact the definition of Dow Theory stock market trends.
Tide, wave and ripple comparison of the Dow theory, the earliest period had begun. And more likely, the sea movement of the Dow Theory has some inspiration. However, this metaphor can not go too far, the tide of the stock market far less with the wave and the wave as the wave of the sea rules. Be used to predict the tide and currents of each exact time schedule can be produced in advance, but the Dow Theory can not give a timetable on the stock market. The future we will return to some parts of this metaphor, but now we will then discuss the Dow theory, the rest of the points and rules:
1. Average index digest all inclusive (except for God, "acts of God") - because they reflect the overall market behavior of numerous investors, including those in forward-looking force, as well as the most knowledgeable person, with an average index in its daily fluctuations in the process of digested in the inclusion of known foreseeable things, and a variety of corporate bonds that may affect the supply and demand relationship. Even to those natural disasters, but it was after the occurrence of rapid digestion, and inclusion of its possible consequences.
2. Three trends - the "market" the term means that the stock price trends in general, in order to evolve, and its most important thing is the main trends, namely, the basic trend. They are large-scale vertical motion, usually lasting several years or more of the time, and lead to stock price appreciation or depreciation of 20% or more, the basic trends in its evolution during the interlude with their second-class trend in the opposite direction - when the basic trend of a temporary promote the overshoot occurs when the retracement or adjustment (second-rate trends and the basic trend has been interrupted with the trend has been classified as a medium - which is used in the ensuing discussion, a useful term). Finally, the second-rate trends from small fluctuations in the trend or the composition of each of which is not very important.
3. The underlying trends - As mentioned earlier, the basic trend is that large-scale, mid-level or above up and down movement, usually (but not necessarily) for 1 year or may be a few years. A follow-up as long as the price of each bounce bounce than the previous one to achieve a higher level, and each one secondary retracement low (ie, the price trend reversal from top to bottom) than those on a retracement of the high, this basic trend is an upward trend, which is called a bull market. In contrast, each moderate decline, will the price down to a gradual low-lying levels, this basic trend is a downward trend, and is called the bear market (these terms bull and bear market. Frequently in some non-rigorous use with a variety of occasions, respectively up and down movement, but in this book, we only use them for impulse Dow theory, the basic trends in the main or the case).
Under normal circumstances - at least in theory - the basic trend is that three kinds of trends in real long-term investors are concerned only with the trend. His goal is to buy as much as possible in a bull market - as long as if he is sure that it has started - and then had to hold up (and Only) It is clear that it has terminated a bear market has begun to the time. He believes that he can be safe to ignore a variety of secondary and minor fluctuations in the retracement. For the dealers, he is entirely possible that concern about second-rate trend in the later chapters of this book will find may thus be profitable.
4. Second-rate trend - this is the price of basic trends in its evolution along the generated significant retracement. They can be in a bull market decline occurred in medium-sized or "callback", it can be in a bear market occurred in medium-sized up or "rebound." Under normal circumstances, they are for 3 weeks to several months ranging from, but rarely longer. Under normal circumstances, the price retracement to advance along the basic trends in the magnitude of 1 / 3 to 2 / 3. In other words, in a bull market, in the second-class callback before the arrival of the industrial index gained 30 points may be steady, during which along with some short-term or a small pause, so that a new medium-sized up before the start of this callback time, etc. is expected to see a 10 to 20 decline. However, we must note that this 1 / 3 ~ 2 / 3 is not unbreakable, it is only a possibility, most of the second-rate trends between the scope here, and many close to the halfway stop, and that retracement to promote the basic trend in front of the magnitude of 50%. Little less than 1 / 3 of the cases, but there are almost completely fail to see the callback.
Thus, we have two criteria for identifying second-rate trends. Any underlying trends in the opposite direction, continuing for at least three weeks, and retracement of the previous one along the direction of prices of the underlying trends to promote the net distance (from the end of a secondary trend of this time began omitted some minor fluctuations) for at least 1 / 3 the magnitude of the price movement can be considered to be second-class medium-size trend. Despite this, the second-rate trend is often very unpredictable. Their identification, to determine their start and further development of the time, the followers of Dow Theory is the most difficult thing. We will also be discussed later.
5. A small trend - they are very short (and very few lasted for three weeks - usually less than 6 days) price fluctuations, from a Dow Theory point of view, its own does not mean much, but they together constitute a moderate trend of . In general, but not all of this, a medium-sized price movement, whether it is inferior or a second-rate trend in the trend between the underlying trends, from a series of three or more clearly the composition of a small wave. From these daily fluctuations to make some of the often very easily lead to misleading inferences. The third trend is the trend of small-only trend that can be manipulated (in fact, although it is still doubtful, even in the present circumstances they may be interested in manipulation of the very important level). The basic trend can not be manipulated with the second-rate trends. If so, then the U.S. Treasury financial resources are limited.
In our discussion went on before the next point to spend a little time to further explain the above-mentioned three kinds of trends, we use the sea movement and movement of the stock market to compare. The trend is like the main wave. We can bring a bull market ratio of a coming wave, it will surface to promote a step to the coast until the last reached a high level and begin to reverse. The following is a tide or low tide, can be taken as a bear market. However, whether it is high tide or low tide when the waves have been surging, constantly hit the coast, and retreat.
In the high tide, the process, each successive wave is much stronger than before the waves reach the coast of its higher level, and its retracement of the time, no less than its previous retracement. In the ebb process, each successive wave rise time than that of its level before the waves reached a low point, but in the retracement than that of its previous waves farther from the coast. These waves are moderate trends - basic or secondary depends on the direction of its movement with the tides the same or the opposite. Meanwhile, the sea has consistently been a small wave, ripple, and wind impact on, they have a similar trend with the waves, and some the contrary, while others are horizontal walk through - the good market, the small trend in daily during the The trend of the small unimportant.
