DOW Theory versus London AIM Stocks


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The Dow Theory – A Must Read For All Investors


Published by Barron’s, this is an explanation of Dow Theory development and an attempt to define its usefulness as an aid to speculation. Rhea carefully studied 252 editorials of Charles H. Dow and William Peter Hamilton in order to present Dow Theory in terms that would be useful for the individual investor.
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Disclaimer: This post is just for information and educational purposes. Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.

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The Dow theory has been around for almost 100 years. It was authored by Charles H. Dow from 1900 until the time of his death in 1902. It is a strong proof of human emotions and manipulations in a stock’s life cycle. Nearly all markets and all sectors show this behaviour because they are all driven by human emotions. During my trading in London AIM stock market I have seen it working more times than usual. It is probably because the AIM market is not very liquid and emotions run high on bulletin boards and hot tip providers. Institutions and bigger players are aware of this and they manipulate long term investors. Manipulation is a big element explained in DOW theory.

Dow theory can be essentially broken into few stages which are shown below.

2015-09-06_08-42-10

Now look at these charts of 15 well known and well traded stocks to compare them against diagram above. Few of these have already completed all stages while others are still in the process. Other thing to note is that the amount of time taken to complete these stages can not be determined with accuracy however, stages can be determined so if you are planning to take positions in the market you may have to keep them open for a long time. Else you can open and close positions on the way while keeping the bigger picture in mind.

QPP (Coming out of Despair phase)

qpp dow

QFI (Quadrise Fuels, going into Despair phase)

qfi

Coms (In Despair stage)

coms

Fusionex (Came out of despair phase finally)

fxi

SEE (Seeing Machines, going towards despair phase)

see

FLOW (Is in Despair phase)

flow

AVO (Going towards despair phase)

avo

IGR (It is in Return To Normal stage)

igr dow

LBB (Is in Despair stage)

lbb

APC (Is close to Despair stage)

apc

VLS (Is in Despair Stage)

vls

NPT (NetPlay is coming out of Despair stage)

npt

ODX (Going towards despair stage)

odx

CBUY (Is coming out of despair stage)

cbuy

EPO (Return to Normal stage)

epo

AFC (Return to Normal Stage)

afc

 

 

 

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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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Use STOPs as a conservative order technique for extra confirmation

Why and how to use Sell STOP Order in Forex Trading

As traders many times we define a potential reversal zones only to see it getting broken due to high volatility. Violation of the prz does not mean that the zone is not valid and price will not react to it. To tackle this problem we can make use of STOP orders instead of LIMIT orders. For example in the trade below the prz is shown in red. We usually Sell LIMIT here so that as soon as the prices reaches the zone we are in the game. But we can achieve the same with minimal risk by using SELL STOP order too. Once the price has come to the zone the order is paced in the queue and as soon as it leaves the zone, it gets fulfilled. Your stop loss will be set wherever you ordered for. This gives a better confirmation on the trade by checking whether the price is going in the anticipated direction or not.

USDJPY SHORT IDEA
How to use sell stop

 

Another example is as below where we have used BUY STOP to fill the order as soon the price left the zone.

 

How top use buy stop
How top use buy stop

 

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
---------------------------------------------------------------------------------
Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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