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The originator of technical analysis - Talking about Dow Theory

The f cashback forexmation of Dow Theory took decades after the death of Dow rebateforexbroker 1902, William P. Hamilton Forex Rapid Rebate Robert Rhea inherited Dows theory and organized and summarized it in their subsequent commentaries on the stock ForexRapidRebate to become the theory we see today. It rebateforex worth noting that the founder of this theory, Charles Dow, claimed that his theory was not used to predict the stock market, or even to guide investors, but was a barometer that reflected the general rebateforexfee of the market Most people treat Dow theory as a technical analysis tool, which is a very unfortunate view In fact, the greatest thing about Dow theory is that it is invaluable. In fact, the greatest thing about Dow Theory is its valuable philosophy, which is the essence of all of it. In all of his writings, Rhea emphasizes that Dow Theory is designed to be an equipment (aid) or tool to enhance the knowledge of the speculator or investor, and is not an all-encompassing strict technical theory that can be divorced from economic fundamentals and current market conditions. In Rheas book <<Dow Theory>>, he discusses three extremely important assumptions and five theorems of Dow Theory that are still basically applicable today, but we cannot interpret them in a superficial sense The three assumptions of Dow Theory are similar to the three major assumptions of what one normally sees in technical analysis theory Assumptions have similarities, however, here, Dow Theory focuses more on its market meaning of understanding Assumption 1: Manipulation (Manipulation) index or securities daily, weekly fluctuations may be subject to human manipulation, secondaryreactions (Secondaryreactions) may also be to this aspect of limited impact, such as common correction trend, but the main Primarytrend (Primarytrend) will not be subject to human manipulation Some may argue that the dealer can manipulate the primary trend of the securities in the short term, if he does not operate, the internal quality of such suitable securities for manipulation will also be subject to the manipulation of others; in the long term, changes in the fundamentals of the company constantly create conditions suitable for manipulating the securities In general, the companys primary trend is still not artificially manipulated, only securities for different institutional investors and different operating conditions only Hypothesis 2: The market index will reflect every piece of information every market person who knows something about financial matters, all his hopes, disappointments and knowledge will be reflected in the daily closing price fluctuations of the SSE and Shenzhen indices or whatever; therefore, the market index will always properly anticipate the impact of future events if there is a fire, earthquake, war, etc. In the market, people are constantly evaluating and judging daily on topics such as financial policies, expansions, leaders speeches, institutional violations, GEMs, etc., and constantly reflecting their own psychological factors into market decisions Therefore, the market always seems difficult for most people to grasp and understand Hypothesis 3: Dow Theory is Objective analysis theory successfully use it to assist speculation or investment behavior, requires in-depth research and objective judgment when using it subjectively, you will constantly make mistakes and losses Five theorems: Theorem 1 - Dows three trends (short-term, medium-term, long-term trend) Any market has three trends: short-term trend, lasting a few days to a few weeks; medium-term trend, lasting a few weeks to a few months; long-term trend, lasting a few months to a few years Any market has three trends: short-term trend, lasting a few days to a few weeks; medium-term trend, lasting a few weeks to a few months; long-term trend, lasting a few months to a few years In any market, these three trends must exist at the same time, and may be in the opposite direction of each other Long-term trends are the most important, and the most easily identified, categorization and understanding of it is the main consideration of investors, for speculators are more secondary Medium-term and short-term trends are part of the long-term trends, the only way to fully understand them and profit from them is to understand their position in the long-term trends Medium-term trends It may be in the same direction as the long-term trend, or it may be in the opposite direction. If the medium-term trend deviates significantly from the long-term trend, it is considered to be a secondary correction or correction. Only in a few cases do speculators and investors care about short-term trends: finding the right time to buy or sell in a short-term trend in order to maximize profits or minimize losses. Categorizing price action into three trends is not an academic game, but an investor who understands these three trends and specializes in long-term trends can also use the reverse medium-term and short-term trends to enhance profits. First, if the long-term trend is up, he can sell the stock short in the secondary folding trend, and near the turning point of the corrective trend, with the profits of the short position to increase the size of the long position Second, in the above operation, he can also buy sell options (puts) or lock buy options (calls) Third, because he knows that this is only a secondary folding trend, and not a change in the long-term trend, so he Finally, he can also use the short-term trend to determine the buy and sell price levels to increase the profitability of his investment. The above strategy is also applicable to the speculator, but he will not take a reverse position in the secondary folding trend; his goal is to take a position in the direction of the medium-term trend. Although his mentality is different from that of an investor, the basic principles of identifying changes in trends are quite similar. Since the early 1980s, due to advances in information technology and the impact of computer program trading, the degree of volatility in the markets medium-term trend has increased significantly. For this reason, I (Victor Spolondi, author of Principles of Professional Speculation) believe that the buy-and-hold strategy for long-term investing may need to be adjusted. However, if you want to have a precise grasp of the medium-term trend, you must understand its relationship with the long-term (primary) trend Theorem 2 - Primary Movements (Short or Long Market) PrimaryMovements : Primary Movements represent the overall fundamental trend, often called long or short markets, and may last for less than a year or even several years correctly determining the direction of the primary trend is the most important factor in the success of speculation There is no known way to predict the duration of the primary trend Understanding the long-term trend (primary trend) is the minimum condition for successful speculation or investment A speculator who has confidence in the long-term trend is able to predict the duration of the primary trend by entering the market in the first place. If a speculator has confidence in the long-term trend, he or she can make a good profit if the timing of the entry is properly judged. For example, the magnitude and duration of secondary falloff movements, whether categorized separately or in aggregate for long and short markets, have almost the same normal distribution as Rheas data at the time; the only difference lies in the number of data points. This phenomenon is indeed noteworthy because it tells us that, despite the technological and intellectual breakthroughs of the last half century, the psychological factors that drive market price movements remain essentially the same. If a price move exceeds the level of the corresponding medians, the statistical risk of intervening in that move increases with each passing day If properly weighed and applied, this knowledge of risk assessment can significantly improve the statistical accuracy of future price forecasts Theorem 3 - Primary Short Markets (contains three main phases) PrimaryBearMarkets: Primary short markets are long-term downward trends. The market is a long-term downward trend, interspersed with important rallies it comes from a variety of adverse economic factors, only after the stock price fully reflects the worst possible situation, this trend will end Short markets will go through three main stages: the first stage, market participants no longer expect stocks can maintain over-inflated prices; the second stage of selling pressure is a reflection of economic conditions and the decline of corporate surplus; The third stage is disappointing selling pressure from sound stocks, regardless of value, and many people are eager to cash in on at least some of these stocks. There are several dimensions to this definition that need to be sorted out. Economic factors are (almost without exception) the result of government actions: interventionist legislation, very serious tax and trade policies, irresponsible monetary or (and) fiscal policies, and major wars. Another observation of Rheas is very important in the context of short markets: at the end of a short market, the market has become immune to further bearish news and pessimistic rhetoric. However, after a severe setback, the stock price also seems to have lost its ability to rebound, and all signs indicate that the market has reached a state of equilibrium, where speculative activity is inactive and selling is no longer depressing the stock price, but buying is clearly not strong enough to push prices up

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